Legal principles
128 In Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466, Fullagar J stated:
The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims "interest reipublicae ut sit finis litium" and "nemo debet bis vexari pro eadem causa".
129 In Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 at 280, Barwick CJ differentiated issue estoppel from res judicata, "using that expression strictly" as a bar to action on the basis that in the latter, but not the former, "the cause of action is the same in each case".
130 Where a plaintiff fails to establish its cause of action, there is nothing to merge in the judgment and the doctrine of res judicata operates as a true estoppel: Macquarie Bank v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 556 ("Macquarie Bank").
131 A judgment by consent may operate as a res judicata. In Chamberlain v Deputy Federal Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 at 508.
132 The identity of claims or causes of action is determined as a matter of substance: Handley, Spencer Bower and Handley: Res Judicata (4th ed, LexisNexis Butterworths, 2009) para 7.05, citing Re Trawl Industries of Australia Pty Ltd [1992] FCA 377; (1992) 36 FCR 406 at 418-419, 422 ("Re Trawl").
133 In Re Trawl, Gummow J concluded that there was a cause of action estoppel. In the Supreme Court, Trawl had sought damages for repudiation of a contract by Effem's refusal to pay a price for Trawl's product calculated in accordance with a formula set out in the parties' contract. The total damages claim was $9.78 million. Before the hearing, the trial judge ordered by consent that other issues raised by Trawl, including estoppel and Effem's alleged contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TPA"), be tried separately from its claim for breach of contract. After a trial, the Supreme Court ordered that a verdict and judgment be entered for Effem on Trawl's further amended points of claim, finding that it had in fact been Trawl that had breached the parties' contract, with the result that there was no trial upon the deferred estoppel and s 52 issues.
134 Subsequently, Trawl commenced proceedings in this Court seeking damages under the TPA based on Effem's alleged contravention of ss 52 and 53 of that Act and for negligence. The case was based upon allegations of pre-contractual representations concerning the prospective business relationship later consummated in the contract the subject of the Supreme Court proceeding. At 418, Gummow J noted that, while a cause of action estoppel operates where claims or causes of action are the same, the phrase "cause of action" is used imprecisely and in several senses including:
(1) the series of facts which the plaintiff must allege and prove to substantiate a right to judgment;
(2) the legal right which has been infringed; and
(3) the substance of the action as distinct from its form.
135 At 422, Gummow J concluded:
… Trawl seeks to recover a loss measured in the same way and in the same quantum as it did on the trade practices claim it propounded in the Supreme Court proceeding. Not all of the misrepresentations alleged in this Court are found in the pleading in the Supreme Court, but some are. …
It is true that the contract dated 26 March 1987, said to have been released and discharged before entry into the heads of agreement, was not pleaded in the Supreme Court. Although not all of it had been taken to trial, the whole of the action by Trawl in the Supreme Court was disposed of. But each set of claims in this Court is particularised by reference to statements which were in evidence in the Supreme Court. Thus, this is a case where it can be said that the same evidence would be led to prove the case Trawl propounded in its pleadings in both actions. The one factual matrix has generated the controversy which is given legal form in the two pleadings. As a matter of substance, in this court Trawl seeks to attack Effem again upon a corresponding cause of action.
In my view, Effem has made out its case of cause of action estoppel against Trawl. This is so, even though no claim previously was made in negligence. The substance of the controversy embraces such a claim. The gist of the recovery sought both in negligence and for contravention of the TP Act is the same; the question is how much worse off is Trawl as a consequence of the acts and omissions of Effem?
136 According to Gummow J at 411, the focus on the substance of the two proceedings (rather than "merely the form in which a legal proceeding happens to be framed") reflects the Constitutional basis of federal jurisdiction (see ss 75, 76 and 77) under which the judicial power of the Commonwealth can only be exercised in relation to a "matter", a matter being "the subject matter for determination, the substantial subject matter of the controversy". His Honour also referred at 418 to Barwick CJ's description in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457 at 473 of the effect of the judicature system of pleading, in general operation in Australia by which it is sufficient to assert facts and nominate remedies sought as a consequence of the occurrence of those facts, without asserting a legal category of action.
137 In Macquarie Bank at 558, Clarke JA (Priestly JA agreeing) expressed the view that a strict approach should be taken to inquiring whether there is in a given case the necessary identity of claims or causes of action, having regard to the co-existence of the Anshun principle. At 558-559, Clarke JA, considering the uncertainty of the meaning of "cause of action", noted that as Anshun demonstrates, "a claim intimately bound up with the facts the subject of the first action but not relied on in that action may, subject to the Anshun principle, be litigated in a later proceeding." His Honour stated (at 559):
The doctrine is concerned with substance, not form, and where parties simply plead facts (without necessarily identifying the cause of action) it seems to me that it is far more helpful to focus on the facts which are said in each instance to support the right to relief.
138 The test identified by Clarke JA appears to be narrower than that proposed by Gummow J (that the same factual matrix had generated the controversy), as Clarke JA noted (at 559) before concluding:
What I think is necessary is an examination of the factual circumstances relied upon to establish the right to relief in each case in order to determinate whether there is a sufficient identity between them to found the conclusion that the same cause of action was in question in both cases. One matter which may be of importance in contract cases is whether, in substance, both actions are based on breaches of a particular term in a single contract. This factor may be conclusive in some cases while in others it may not be. On the other hand, the defence of estoppel by record may defeat a second action despite the fact that it is based on a breach of a term of the contract not relied on in the first action: eg India Steamship. Again, the fact that both claims arise out of the same incident may be most material.
139 The bank had brought an action including a claim that its former solicitors were negligent or had breached their retainer in failing to do all things necessary to ensure that a loan advance was properly secured by way of a valid and enforceable assignment and first mortgage over life policies in favour of the bank. That claim was dismissed after a hearing, during which an application by the bank to amend the claim against the former solicitors was refused.
140 Subsequently, the bank commenced proceedings against the former solicitors making what Clarke JA described at 548 as "the wider claim that Westgarths had failed to warn the bank that the guarantees and mortgages of some of the third party companies had not been executed by the duly authorised officers and therefore may have been invalid or unenforceable".
141 Clarke JA concluded that there was no available res judicata defence (and no Anshun estoppel, as discussed later in these reasons). His Honour reasoned that the conduct relied upon by the bank as constituting the former solicitors' breaches in relation to the relevant securities in the second proceedings was distinct from the conduct relied upon in the first action. His Honour acknowledged that all of the claims, in substance, arose out of the former solicitors' contractual obligations. However, his Honour concluded that the alleged failures in respect of the insurance policies constituted one set of breaches of contract and there were distinct breaches in respect of the mortgage securities. His Honour concluded, at 561, "[i]n simple terms, the issues raised in the second proceedings were not litigated in the first".
142 In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2001] FCA 1861; (2001) 119 FCR 1 ("Safeway"), the ACCC had alleged contraventions of Part IV of the TPA against Safeway and two of its employees, Mr Jones and Mr Brookes. After a trial, an order was made by consent dismissing the proceeding against Mr Brookes. Goldberg J rejected an argument that a defence of res judicata could be maintained by Safeway and Mr Jones on the basis of the judgment entered in favour of Mr Brookes. At [1143], Goldberg J concluded that the causes of action against Mr Brookes were different from the causes of action alleged against Safeway and Mr Jones. In particular, his Honour noted that the causes of action against Mr Brookes were based upon the allegation that he was knowingly concerned in, or party to, or aided, abetted, counselled or procured, contraventions of the Act by Safeway Stores. At [1144], his Honour noted that the causes of action against Mr Brookes required matters to be established against Mr Brookes that did not have to be established against Safeway Stores, such as Mr Brookes' knowledge of the essential elements of the contraventions by Safeway Stores. At [1145], Goldberg J also found that the defence of res judicata could not be maintained because Safeway Stores was not a privy of Mr Brookes.
143 In Pollnow v Armstrong [2000] NSWCA 245 at [13], Meagher JA (Priestley and Sheller JJA agreeing) expressed the view that for the purposes of res judicata the court is restricted to the examination of the plaintiff's pleadings and the court's orders.