See para [38] above.
61 The way in which the arbitrator expressed his conclusion confirms not only that the particular claim was decided under and by reference to the 1972 trading agreement and lease only, but also that the question of survival of the right of indemnity was fundamental.
62 For similar reasons, I think that the arbitrator's decisions on the "reasonable" cost issue (paras 1.16(d), 1.17 of the 1984 Standard Terms) and the "reasonable standards of skill, care and efficiency" issue (para 3.11 of the same document) were fundamental. A decision adverse to Codock on either of those issues must have meant that its case failed. To put it another way, Codock needed to show, on each of these issues (as it needed to show, on the issue in relation to survival of the right of indemnity) that the position for which it contended was correct. If it did not do so it could not succeed.
63 I do not think that it matters that the arbitrator found several different reasons for rejecting the Commonwealth's submission on these matters. Issue estoppel is concerned with the decision of issues, not with the reasoning that supports the decision on the issue.
64 The next issue raised by the Commonwealth relates to the nature of the claims. It points out the difference in wording in para 41 in the points of claim in the arbitration compared to para 24 of the contentions in this case (the former including, and the latter excluding, the words "to the extent that these costs are not covered by the Plaintiff's insurance"): see para [23] above.
65 I do not regard the omission of the words to which I have referred as indicating that the costs in respect of which reimbursement is sought in the present case are fundamentally different to the costs in respect of which reimbursement was sought in the arbitration. Codock's only right is to recover to the extent that it is not entitled to be indemnified by some insurer. If some of the costs claimed in these proceedings are costs in respect of which Codock is entitled to be indemnified by an insurer, the Commonwealth is not obliged to pay them; and this could be raised in these proceedings by way of defence. That defence would not be inconsistent with, or estopped by, any determination made by the arbitrator. But the fact that Codock has not sought to define the costs by reference to the lack of entitlement of indemnity from an insurer does not, I think, alter the fundamental nature of those costs.
66 The next issue raised by the Commonwealth is that the costs in respect of which indemnity is now claimed are not the costs that were the subject of the arbitration. So much may be conceded. Indeed, if they were identical, there would be a cause of action estoppel: the claim to them would have merged in the award. But, as Diplock LJ recognised in Thoday (see para [46] above), fulfilment of an identical condition may be a requirement common to two or more different causes of action. The doctrine of issue estoppel operates precisely because the same issue is common to different causes of action between the same parties; it is not defeated because the causes of action are different.
67 In this context, the Commonwealth relied on the decision of the House of Lords in New Brunswick Railway Company v British and French Trust Corporation, Limited [1939] AC 1. In that case, the appellant issued a series of bonds. In an action by the respondent against the appellant on one bond of a particular series, the appellant did not enter an appearance and judgment was obtained by default. In a subsequent action on other bonds in the same series, couched in the same terms as the bond upon which default judgment was obtained, the appellant sought to raise defences. The House of Lords held that it was not estopped from doing so because, whatever were the estoppels that flowed from the default judgment, they related only to a cause of action founded upon the very bond that had been in suit; and different bonds were in suit in the later proceedings. That decision is clearly distinguishable. The arbitrator found in favour of Codock on its claim under the 1972 trading agreement and lease as amended. The same agreement (amended by the same subsequent agreements) is the foundation of the present claim. Lord Maugham LC said at 21 that the effect of the default judgment was to estop the defendant "from setting up in a subsequent action a defence which was necessarily and with complete precision, decided by the previous judgment. In other words, by the res judicata in the accurate sense." It followed, as his Lordship concluded at 21-22, that application of the principle would not estop the appellant from raising any contention in an action on the other bonds. Similarly, Lord Wright at 38 noted that there was no issue before the court in the earlier case "as to any or all of the … bonds now sued on". Lord Romer at 41-42 said that the only question of construction in the earlier proceedings "was one as to the construction of the bond then being sued upon" and that the default judgment could not "be regarded as having determined the question of the construction of the other bonds … ". It is quite clear that the reason for denying the estoppels was that the earlier and later actions were not brought on the same agreement. Here, they are.
68 There are, of course, other issues that, whilst they may arise now as they arose before the arbitrator, cannot be regarded as having been decided by the arbitrator so as to give rise to an issue estoppel. They would include whether items of cost were incurred reasonably (ie, whether in particular litigation it was reasonable for Codock to incur a particular item of expense); whether they are associated with cross-claims against the Commonwealth; and, no doubt, other matters. The award cannot give rise to any issue estoppel on those issues. They require consideration on a case by case, or claim by claim, basis.
The Arnold issue
69 The House of Lords in Arnold affirmed the decision of the Court of Appeal [1990] Ch 573. The Court of Appeal in turn affirmed the decision of Sir Nicholas Browne-Wilkinson V-C [1989] Ch 63. There was no difference of substance between the reasoning of Browne-Wilkinson V-C, the Court of Appeal and the House of Lords. That, for a judge at first instance, is a powerful body of judicial opinion.
70 In O'Toole v Charles David Proprietary Limited (1991) 171 CLR 232, Brennan J said at 258 that the decision of the Court of Appeal in Arnold "rests on an uncertain foundation". (As I have just said, the reasoning of the House of Lords was not in substance different to that of the Court of Appeal or of Browne-Wilkinson V-C at first instance.) His Honour's doubt was shared by Callaway JA (who referred to Brennan J's "scepticism") in Linsley v Petrie [1998] 1 VR 427, 449. In the same case, Hayne J had referred, at 441, to the decision in Arnold and to what Brennan JA had said of that decision in O'Toole, but did not indicate whether he, too, shared Callaway J's scepticism. The third judge, Smith AJA, said simply at 449 that the point did not arise for decision.
71 In Tiufino v Warland (2000) 50 NSWLR 104, Handley JA (with whom Mason P and Powell JA agreed) referred both to the decision in Arnold and to Brennan J's view of it. At 110, Handley JA said that "[i]t is doubtful whether the existence of later material relevant only to a question of law could be a special circumstance where there was a right of appeal on questions of law from the earlier decision … ". Otherwise, the question not arising, he did not consider whether the decision in Arnold should be followed in Australia. (The Court in Tiufino did not follow the decision in Linsley, but nothing turns on this for present purposes.) This is consistent with the view expressed in The Doctrine of Res Judicata at 95 [189] where, having referred to the decision in Arnold, reference is made to the need "to keep this exception within narrow limits to avoid undermining the general rule and provoking increased litigation and uncertainty". The view is then expressed that in Arnold "the decisive factor was the absence of an effective right of appeal" and that "[i]f a right of appeal had existed the general rule should have been applied and the estoppel enforced".
72 Lord Keith and Lord Lowry both focussed on the words of Sir James Wigram V-C in Henderson v Henderson 3 Hare 100, 115 (67 ER 313, 319), where the Vice Chancellor referred to the need for parties "to bring forward their whole case" so that "except under special circumstances" the Court would not permit the same parties to relitigate something which might have been, but was not, brought forward in the earlier litigation. (I consider this in more detail in the section below dealing with Anshun estoppel.) Their Lordships appear to have reasoned that, since the estoppel established by Henderson was a species of issue estoppel, the exception comprehended by the reference to "special circumstances" was a characteristic of issue estoppel generally. I have difficulty in accepting this logic. Their Lordships' reasoning in effect attributes to the entire family a characteristic of one member. Further, it appears inconsistent with the warning that the application of the Henderson principle to cases of issue estoppel is to be treated with caution: Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589, 598-599 (Gibbs CJ, Mason and Aickin JJ). The reasoning in Arnold seems to me to be inconsistent with the insistence on finality in litigation, which underpins the doctrine of issue estoppel (as the judgment of Dixon J in Blair makes plain).
73 The Commonwealth relied on the decision of Gillard J in Kingston City Council v Monash City Council [2001] VSC 41. At [105], his Honour said that " … it is well established that there may be special circumstances which exclude the operation of the plea of issue estoppel." His Honour referred to what Wigram V-C had said in Henderson and to the speech of Lord Keith in Arnold. It does not appear that his Honour was referred to the doubt entertained by Brennan J in O'Toole, or to the scepticism expressed by Callaway JA in Linsley. In those circumstances, I do not think that his Honour's acceptance of the proposition accepted by the House of Lords in Arnold relieves me of the obligation to consider the matter for myself.
74 The decision in Arnold has been referred to a number of times in this country, in New Zealand and in Canada. I have already referred to the decision in Linsley. At first instance in that case (Petrie v Linsley (1995) 21 MVR 413), Eames J gave consideration to the decision in Arnold. He noted the view expressed by Brennan J in O'Toole, and that nothing in the High Court authorities dealing with issue estoppel suggested that the operation of the doctrine might be alleviated by reference to "special circumstances" which would make its application unjust. He said at 438 that he thought that he should follow the decision where there was no direct conflict between it and a decision of an appellate court in Australia, on the basis that to deny the possibility of relief would "elevate a judge-made principle, one based on the desirability of certainty, finality and accepted correctness of decisions of the court, to a plateau which undervalues the overriding concern of the courts of justice to litigants".
75 In Briggs v Hall & Anor (unreported, 8 November, 1994, BC 9401392), Batt J considered the decision in Arnold, noting that it had been accepted by the Court of Appeal of New Zealand (Meates v Taylor [1992] 2 NZLR 36). Batt J considered that, absent High Court authority to the contrary, considerations of "good sense and justice" required "that the exception of special circumstances should apply here in the case of fresh evidence" (BC at 9). His Honour accepted the Arnold principle in so far as it allowed of an exception in the case of fresh evidence, but was doubtful that it should be followed in so far as it allowed of an exception where the earlier decision, from which the issue estoppel proceeded, had effectively been overruled in a subsequent case.
76 The decision in Arnold has been followed in Canada; see for example Hockin v Bank of British Columbia [1995] BCJ No 688; Robb v St Joseph's Health Care Centre [2001] OJ No 606; Stellar Properties Ltd v Botham Holdings Ltd [1994] BCJ No 639; Clayton v Garrett [1995] BCJ No 364. Those decisions do not analyse in any detail the reasoning in Arnold.
77 With some hesitation, I think that I should adopt the path taken by Batt J in Briggs and by Eames J in Petrie. That is to say, in the absence of any decision of the High Court or an intermediate appellate court in this country to the contrary, I think that I should accept that, in principle, the application of the bar created by an issue estoppel may be avoided where there are special circumstances. What are "special circumstances" must be a matter to be decided from case to case. With Batt J, I doubt that those special circumstances would include that the decision giving rise to the estoppel has been overruled in some subsequent case. As I have noted in para [75] above, Batt J would accept the Arnold principle in the case of fresh evidence. That is consistent with what Handley JA said in Tiufino (see para [71] above). I note that his Honour, writing extracurially, said in The Doctrine of Res Judicata (again, see para [71] above), that the essence of the decision in Arnold was there was no, or no effective, right of appeal. However, for reasons that I give in para [83] below, I do not think that absence of an effective right of appeal, flowing from the parties' consensual adoption of arbitration as their dispute resolution procedure, should necessarily and of itself amount to special circumstances for this purpose.
78 The circumstances relied upon by the Commonwealth to support its argument that the bar should not apply were that there was no right of appeal from the arbitrator's decision and that his decision was in any event, on the relevant points, wrong.
79 It is correct to say that there was no right of appeal from the interim award. By s 38(2) of the Commercial Arbitration Act 1984 (NSW), an appeal lies, subject to sub s (4), on a question of law arising out of an award. By sub s (4), absent consent, which I think was lacking in this case, the appeal may be brought only by leave of the court. Sub s (5) specifies the circumstances in which leave is to be given. They include that there must be either manifest error of law on the face of the award or strong evidence of error in circumstances where determination of the question is likely to add substantially to the certainty of commercial law (s 38(5)(b)(i), (ii) respectively).
80 In the present case, I do not think that there was manifest error of law on the face of the interim award. Nor do I think that there is evidence, strong or otherwise, that there was an error of law. On the contrary, I think that, on the relevant questions of construction, the arbitrator's decision was correct. If I were hearing an application for leave to appeal I would not grant it; although it may be conceded that one of the requirements (that determination of the question could substantially affect the rights of one or more parties (s 38(5)(a)) would be met.
81 It follows from what I have just said that I do not agree with the second submission for the Commonwealth, namely that the arbitrator's decision was, relevantly, wrong.
82 As to the other reason - that there is no right of appeal - I am prepared to assume (for the reasons given in para [77] above), without finally deciding, that in principle this might constitute a ground for declining to recognise the effect of issue estoppel (if it be possible to do that). Ordinarily, it would not of itself be a sufficient ground; pointing to the absence of a right of appeal is of little utility where the decision appears to have been correct (because, by hypothesis, in those circumstances, even if there were a right of appeal, the appeal would have been unlikely to succeed).
83 More fundamentally, though, I think that if recognition of the effect of an issue estoppel is to be withheld, this could only result from a balancing of all the relevant considerations. It is, in substance, a discretionary exercise. One of the factors to be taken into account is that the parties elected, by their contract, to resolve any differences by arbitration. Arbitration is a consensual process. The parties have chosen arbitration as their means of dispute resolution. They have chosen it with all its advantages (including privacy and relative informality) and all its disadvantages (including, if it be one, the absence of a right of appeal). Arbitration is inherently a process that, because there is no right of appeal, is more conducive to what might be called immediate finality than conventional litigation where there is (usually) a right of appeal. Presumably, the parties weighed all these considerations before they decided to adopt arbitration as their preferred method of dispute resolution. Presumably, the parties understood that one of the features of arbitration was the absence of a right of appeal. With the greatest of respect to the House of Lords in Arnold, I think that their Lordships' decision may have overlooked this aspect of the balancing exercise.
84 If the method of dispute resolution were imposed by law, rather than by consensus, and if the imposed method of dispute resolution included as a feature that there was no right of appeal, then that might be a circumstance of some weight in deciding whether to decline to recognise the bar created by an issue estoppel. If however the method of dispute resolution is consensual, it seems to me that the choice of the parties must be taken to include all relevant features of the chosen method. Where the parties have chosen a method of dispute resolution that, firstly, is capable of giving rise to issue estoppels and, secondly, does not include a right of appeal, the absence of that right of appeal does not seem to me to be a powerful reason for withholding recognition of any estoppels that follow from the use of the agreed procedure.
85 In short, the parties having chosen a method of dispute resolution that includes as one of its characteristics an absence of a right of appeal, I find it hard to see that that absence could be regarded as a special circumstance to enliven the application of the Arnold doctrine.
Conclusion on the Arnold issue
86 I do not think that any basis has been shown for declining to recognise or enforce the issue estoppels created by the interim award.