Firstnamed Plaintiff Secondnamed Plaintiff v Defendant

PRACTICE AND PROCEDURE - Striking out of pleading - Extent to which real controversy between parties can be determined on an application to strike out pleadings - Extent to which res judicata and issue estoppel to be determined at trial rather than on an application to strike out pleadings - Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd [1993] FCA 342; (1993) 43 FCR 510, Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, O'Keefe v Williams [1910] HCA 40; (1910) 11 CLR 171 - Supreme Court (General Civil Procedure) Rules 2005 (Vic), Order 23.01.

1 This matter comes before the Court as a result of an application by both the plaintiffs and the defendant, in separate proceedings. The first application is by the plaintiffs in proceeding number 2026 of 2002 ("the 2002 proceedings"). They seek to amend their statement of claim, as set out in the schedule to a summons dated 9 March 2010. For convenience, this application is referred to as the "amendment application". The second is an application by the defendant, in proceeding number 7779 of 2009 ("the 2009 proceedings"), to strike out parts of the plaintiff's claim. For convenience, this is referred to as the "strike out application".

2 The 2002 proceedings and the 2009 proceedings concern the operation of a prosperity bond investment scheme utilising prosperity bonds, which were policies of life insurance within the meaning of the Life Insurance Act 1995 (Cth). The bonds were issued by the defendant as insurer.

3 In 1998, large amounts of money were invested in these prosperity bonds by a group of investors. The policy premiums for these bonds, and their resulting earnings, were placed in a single identified fund. This fund was divided into units of equal value, which were allocated to investors in the bonds according to their entitlement. The value of each of the units reflected the value of the underlying investments in the portfolios of assets with respect to which those units were issued. There was a "cash" category portfolio and a "secure" category portfolio. Investors in the bonds, as policyholders, were able to switch their units from one portfolio to another on notice to the defendant. The "cash" category portfolio units maintained a relatively stable value, whereas the "secure" category portfolio units varied in unit price as their price was fixed with reference to daily movements in share indices.

4 Until mid-2000, the defendant adopted a practice of historical pricing with respect to units, reflecting the value of the "secure" category portfolio. This enabled unit holders to assess likely movements in the value of the "secure" category portfolio units, by observing and assessing movements in share indices. As the unit value changed in line with share indices, unit holders could make profits (and avoid losses) by strategically switching between the "cash" and "secure" category portfolios. However, from mid-2000, forward pricing of units was applied by the defendant. This restricted the ability of unit holders to make profits by switching between the "secure" and "cash" categories of units. In order to continue to profit from switching under the forward pricing regime, unit holders sought to utilise sequential switch notices. These were given to the defendant interspersed with notices of revocation of switch notices. Each of these notices was given on the basis of the unit holders' assessments of movements in share price indices, which would affect the price movements in the "secure" category portfolio units. The use of, what might be termed, a sequence of switch and revocation notices, raised a variety of issues, including whether unit holders were permitted to "short sell" under the terms of the prosperity bond policies, and whether the defendant was entitled to give effect to a switching notice immediately or was obliged to wait for three working days before giving effect to a switching notice.

5 The dispute between the parties critically involved the interpretation of clause 1.8 of the prosperity bond policy, which is in the following terms:

"1.8 Large Withdrawals

We reserve the right to delay for up to 30 days any cash withdrawal or any transfer between the investment portfolios which would otherwise require the cashing within any 30 day period of Units valued at more that (sic) $100,000. We will then use the Unit Price(s) applicable at the end of the period of delay.

AXA Australia will waive its right to delay withdrawals and switches for 30 days, providing the investor gives three working days notice of its intention to switch or withdraw. The unit price will be the price on the day when the notice is given in writing. AXA Australia also agrees that should the investor change their mind prior to the completion of the portfolio switch or withdrawal transaction and not proceed with the switch or withdrawal, no penalty will be involved."

In addition to claims by the investors that the defendant had breached these provisions, the investors claimed against the defendant on the basis of estoppel and contravention of s 52 of the Trade Practices Act 1974 (Cth).

6 The investors' claims were the subject of a long trial before Redlich J between October and December 2003, March and April 2004, and May, September and December 2006.[1] The issues raised in that trial were complex, both factually and legally, and resulted in a judgment of 387 pages. The proceeding at first instance was subject to an appeal the result of which, in general terms, was to vary the decision of Redlich J.[2]

7 Following the appeal, the Court of Appeal made orders which, amongst other things, remitted certain questions to the Trial Division for determination, as follows:[3]

"4) The following questions are remitted to the trial judge or, if he not be available to consider the matter further, to another judge of the Trial Division, for determination according to law:

a) Whether the defendant committed any and what breach or breaches of clause 1.8 of the plaintiffs' Prosperity Bond policies.

b) In the case of any breach of clause 1.8, whether the plaintiff in question is entitled to damages for breach in contract in respect of the breach and, if so, the amount of those damages;

c) In the case of any breach of clause 1.8, whether the plaintiff in question is entitled to damages in lieu of specific performance in respect of the breach and, if so, the amount of those damages.

5. It is directed that the judge to whom the above questions are so remitted for determination shall:

a) determine in light of the evidence already adduced whether it is just and appropriate for the parties to be permitted to adduce any further evidence or should be confined to that already adduced;

b) determine whether any question should be deferred to a special referee for decision or opinion and, if so, may refer the question accordingly."

8 In broad terms, the 2009 proceedings arise out of the 2002 proceedings, though they are said by the plaintiffs to be separate proceedings which arise out of events subsequent to matters relevant to the 2002 proceedings.

9 The plaintiffs sought leave under Order 36 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ("the Rules") to make the amendments contained in the Further Amended Statement of Claim set out in the schedule to the summons dated 9 March 2010. The defendant opposed this application. The plaintiffs relied, principally, on the provisions of Order 36.01(1)(a), as follows:

"(1) For the purpose of -

(a) determining the real question in controversy between the parties to any proceeding; or

...

the Court may, at any stage, order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding."

10 The plaintiffs prefaced their submissions by reference to paragraphs 15(a) and 15D of the Further Amended Statement of Claim dated 19 December 2003 which, the plaintiffs said, indicates that their claim has always been for damages, including damages in lieu of specific performance, over the life of their respective policies. The plaintiffs also submitted that the claim with respect to breach of clause 1.8 of the plaintiffs' prosperity bond policies, in paragraph 14(b) of the current statement of claim, is expressed in open-ended terms. It reads: "Since 30 October 2000 the defendant has completed switches and refused to process cancellations of instructions to switch given to it by the Plaintiffs within three working days of the giving notice of intention to switch".

11 With reference to these pleadings, the plaintiffs submitted that they were seeking leave to amend their statement of claim to better identify the allegations of fact made in support of their claim. In this respect, reference was made to the particulars of damage, contained in paragraph 15(a) of the existing statement of claim, as follows:

"(a) Loss of money which the Plaintiffs would have earned over the life of each of their respective Policies and the Defendant performed its contractual obligations and permitted the Plaintiffs to conduct switches and cancellations in accordance with the express implied terms of the Prosperity Bonds issued to each Plaintiff."

Reference was also made to the pleading in the alternative, in paragraph 15D of the existing statement of claim, that "... the Plaintiffs are entitled to damages in lieu of specific performance of the Plaintiffs' Prosperity Bonds".

12 The amendment sought to be made to paragraph 15 was to add a reference to the breaches pleaded "in paragraph 14 and paragraph 14I" (emphasis placed on amendment sought). The reference to the proposed new paragraph 14I, which referred to paragraphs 14A through 14H, was the critical amendment the plaintiff sought to make.

13 Proposed paragraphs 14A to 14C deal with the investment strategy alleged to have been developed and applied by Dr Peter William Keller ("Keller") between the time the plaintiffs entered into an Investment Management Agreement until they terminated that Agreement with Keller on 15 November 2001. Reference is also made to the Keller strategy, as pleaded by reference to the Investment Management Agreement in paragraph 14B, in paragraphs 14E, 14F, 14H and 14I.

14 Proposed paragraph 14D, which was strongly objected to by the defendant, deals with events subsequent to the termination by the plaintiffs of their Investment Management Agreement with Keller. It pleads that by 15 November 2001, the date upon which this Agreement was alleged to have been terminated by the plaintiffs, they had developed their own strategy for the exercise of their rights under their Prosperity Bond policies. This strategy is referred to as the Capital Preservation Strategy. The particulars to the proposed paragraph 14D provide details of alleged elements of the Capital Preservation Strategy and, in sub-paragraph (ii), make reference to the revocation of switch notices "in accordance with certain decision rules as set out in the affidavit of Scott Tyne sworn on 3 March 2010".

15 The proposed pleading in paragraph 14D is followed by a pleading in paragraph 14E that the defendant "made it apparent that further attempts to issue or revoke switch notices to give effect to the Keller strategy and subsequently the Capital Preservation Strategy in accordance with the terms of the Plaintiffs' policies would be futile". The plaintiffs further pleaded that they were, "between 14 November 2000 and 15 November 2001, ready, willing and able to issue through Keller switch notices and revocations in order to give effect to the Keller Strategy",[4] and that from 15 November 2001 onwards were "ready, willing and able to issue switch notices and revocations in order to give effect to the Capital Preservation Strategy".[5] The pleadings continue with the allegation that the defendant "dispensed with or otherwise waived performance by the Plaintiffs of such aspects of their policies as were necessary to give effect to the Keller Strategy ... and the Capital Preservation Strategy" during the relevant times.[6] The plaintiffs also proposed to plead that the defendant was in breach of its obligations under clause 1.8 of the Prosperity Bond policy, which was necessary to be performed or observed to give effect to both these strategies during the relevant times.[7]

16 In support of its submissions that the proposed amendments were necessary to enable the Court to determine the real question in controversy between the parties, the plaintiff referred the Court to judgments of members of the High Court in Aon Risk Services Australia Ltd v Australian National University.[8] The plaintiff referred to the judgment of French CJ, and also to the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ. French CJ said:[9]

"14. There is a distinction between the discretion of a court to allow a party to amend its pleading on that party's motion and the requirement to make all such amendments as may be necessary to determine the real questions in controversy. That requirement engages with the authority conferred on the court to make amendments of its own motion.[10] The point was made in 1887 by the Full Court of the Supreme Court of Victoria in Dwyer v O'Mullen[11] in relation to O XXVIII, r 1 of the 1875 Rules. Higinbotham CJ said of the last clause of the rule that it:[12]

'makes an amendment mandatory. The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases - for the purpose of determining the real question in controversy between the parties - that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon'.

The position is different where a party seeks to set up, by amendment, a new case at trial.[13]"

The plaintiff also referred to the following passage in the joint judgment:[14]

"71. The words 'the real issues in the proceeding' in r 501(a) obviously refer to issues raised, perhaps unclearly, in the pleadings at the time of the application for leave to amend. The 'real' issues may also extend beyond the pleadings, as cases concerned with the purpose stated in the original Rules show. But, as is explained in these reasons, to be regarded as a real issue, and for amendment therefore to be necessary, the relevant dispute or controversy must exist at the time of the application. Amendments raising entirely new issues fall to be considered under the general discretion given by r 502(1), read with the objectives of r 21."

In the course of the defendant's submissions, the defendant referred to the cautionary comments of French CJ in this case, as follows:[15]

"31. The amendment allowed in the present case could only be supported as an exercise of the discretion under r 502. On no view was it required by r 501(a). The requirement to make amendments for the purpose of deciding 'the real issues in the proceeding' does not impose some unqualified duty to permit the late addition of any new claim. The real issues in the proceeding were to be determined in this case by reference to the limited way in which ANU had deliberately chosen to frame its original claim against Aon, and its persistence in that limited approach up to the trial date itself.

32. The requirement under r 501(c) to avoid a multiplicity of proceedings is to be understood as operating within the framework of an ordered progression to a fixed trial date. It does not oblige the court to accept the addition of new claims at the last moment before trial, on the basis that if they are not allowed there might be subsequent proceedings in which those claims are raised. The steps which r 501(c) requires to be taken to avoid multiple proceedings are 'all necessary amendments'. The Court had no basis for inferring that, absent the amendments, there would be further proceedings."

17 The defendant opposed the plaintiffs' proposed amendments on the basis of cause of action estoppel, that is res judicata, and issue and Anshun estoppel. More particularly, the defendant submitted:

"8. The combined allegations (14A-14I) repeat an allegation already adjudicated upon in the 2002 proceeding. The allegations against the defendant in paragraphs 14H and 14I are that in the premises of paragraphs 14A to 14G, the effect of the defendant's actions was to waive performance of the contract by the plaintiff and thereby to breach its contract. The only action of the defendant which is referred to is that set out in para 14E; any actions in paras 14A-14D and 14F and 14G are actions of the plaintiffs or non-parties, not of the defendant. The action alleged in para 14E is that the defendant 'made it apparent' that 'further attempts' to give switch and revocation notices 'would be futile'. The particulars provided of the 'making apparent' demonstrate that the claim is estopped by the earlier judgment. The particulars are:

(a) The defendant acting and failing to act as alleged in para 14(b), that is, by conduct which was relied on at trial. As shown by the particulars to paragraph 14(b), this is conduct in November 2000 only.

(b) A letter sent by the defendant on 14 November 2000. This letter is particularised at paragraph 14(b) - partic (iv)."[16]

18 Continuing, the defendant submitted that the plaintiffs had already mounted claims against it based on these acts. Particular reference was made to the allegation in paragraph 15A that "by its conduct alleged in paragraph 14" the defendant "evinced an intention not to be bound" by the contract. The defendant submitted that this constitutes an argument that the defendant repudiated its contracts with the plaintiffs: a claim which, the defendant submitted, both the trial judge and the Court of Appeal rejected. The defendant submitted that the new allegations amount to no more than a re-presentation of the previous repudiation claim. This, said the defendant, is because the single and central fact on which the plaintiffs rely to bring their new repudiation claim remains the same, and was the only factor relied upon by the plaintiffs to bring the previous repudiation claim. The defendant also submitted that the plaintiffs had previously alleged that the defendant's conduct referred to in paragraph 14 breached its contracts with the plaintiffs. In this respect, the defendant submitted that the plaintiffs had provided particulars of alleged breaches, and that the evidence at trial was that the plaintiffs only gave switches and cancellation instructions through to 9 November 2000, and thereafter the defendant took no action as the plaintiffs delivered no instructions. Consequently, the defendant submitted, there was no occasion on which it committed or could have committed a breach after that time.

19 The defendant also submitted that the claims now embodied in proposed paragraphs 14A to 14I had already been adjudicated upon. This submission was made on the basis that the Court of Appeal, having determined the correct interpretation of clause 1.8 of the prosperity bond policies, remitted for determination to the Trial Division whether any and what breaches of contract occurred. Further, the defendant submitted that this process must necessarily occur with reference to the pleadings of the plaintiffs on which it presented its case at trial. The defendant submitted that it is not now open to the plaintiffs, after judgment, to say "by the way, we should have mentioned ..." and then seek to amend its case "to present a further twist". The defendant also said, with reference to Aon Risk Services Australia Ltd v Australian National University, that to allow amendment in this case offends the public interest in the finality of litigation.[17] In this respect, the defendant submitted that there was no basis put forward by the plaintiffs to justify that they should now seek to expand the scope of the dispute, particularly if the plaintiffs were clearly aware that Keller continued to issue switch notices and yet elected not to deliver them.[18]

20 Consequently, the defendant submitted that the proposed amendments are objectionable as the plaintiffs are, by means of these amendments, seeking to relitigate a matter which has already been heard and determined, contrary to issue estoppel and the public interest in favour of the finality of litigation. Alternatively, the defendant submitted that the plaintiffs are seeking to mount a fresh claim on the basis of existing facts in the proceeding. The defendant submitted that this is prevented by res judicata or cause of action estoppel because "the one factual matrix has generated the controversy which is given legal form in the two pleadings".[19] Further, the defendant submitted that if, contrary to the its submissions, the claim now raised by the proposed amendments is considered to be a fresh claim, then the plaintiffs should be taken to be seeking to bring forward a claim which they could have and should have brought previously, but chose not to. Consequently, the defendant said, this is not permissible on the basis of Anshun estoppel.[20]

21 In relation to matters going to the substance of the claim, the defendant submitted that the proposed paragraphs 14E and 14F did not take the position of the plaintiffs any further because, it was said, the giving of the Keller switch notices would not have benefited them. As to this, the defendant submitted:[21]

"17. The evidence at trial of the 2002 proceeding was that, after 14 November 2000 to approximately 16 November 2001, Dr Keller gave a series of 'simulated notices' to a third party (Mercer, actuaries) (Court Book, Vol 5, pp 2486-2815) apparently so as to ground claims by all Investment Club policyholders (for whom he was throughout that period their agent for managing the policies) for damages arising from the notices he would have given on behalf of all those policyholders. Unfortunately for the plaintiffs, the simulated notices given by Dr Keller were predicated on his erroneous understanding that the terms of the Investment Club policies permitted 'short selling': the trial judge and Court of Appeal rejected the short selling basis on which the notices were framed. Mr Tyne confirms this: affidavit of 3 March 2010, para 7, 26. The notices would have been invalid and as such are unable to found a breach of the policies. To introduce the claim is embarrassing, vexatious and oppressive.[22]"

22 More generally, the defendant submitted, the claim which the plaintiffs now seek to introduce with the proposed amendments to paragraph 14 is untenable and ought not to be permitted. In this respect, the defendant submitted:[23]

"18. More generally, the claim which it is now sought to introduce is so untenable that it should not be permitted. In essence the claim which the plaintiffs now seek to bring is that

(a) they could have given notices to the defendant;

(b) if they had given those notices they would have earned $x;

(c) the defendant is thus liable to pay then $x.

The premise of this extraordinary claim is that the defendant by its actions prevented the plaintiffs from delivering switch notices from 10 November 2000 onwards. As to the actions of the defendant which so prevented the plaintiffs from exercising its right to switch, all that the plaintiffs point to is the defendant's letter of 13 November 2000. No other particulars are provided. There is no allegation that the plaintiffs informed the defendant that they had decided to depart from Dr Keller's strategy of giving more or less daily notices of the 'short selling' type held by Redlich J and the CA to be invalid. There is no allegation that the plaintiffs gave simulated switch notices to Mercer or a similar firm. There is not even a table showing the switch notices and cancellation notices that the plaintiffs now say they would have given over the eight year period between November 2001 and the present day. On the contrary, the only relevant action taken by the plaintiffs was to pursue vigorously at trial and on appeal a contention that short selling was permitted under the policies."

Concluding, the defendant said that there was such a lack of evidence to support such an "inherently untenable claim", that it should now be concluded by the Court that the claim was "hopeless and should not be permitted to be raised".[24]

23 Finally, the defendant submitted that the giving of a switch notice by the plaintiffs to it is a pre-condition or condition precedent to any obligations of the defendant under the prosperity bond policies, and that this cannot be waived by the grantor.[25] The defendant also submitted that any claims now sought to be raised by the plaintiffs prior to April 2004 are statute barred and that, consequently, before granting leave to amend, the Court must be satisfied that the defendant would not thereby be prejudiced in the conduct of its defence.[26]

24 In relation to issues of prejudice, the plaintiffs made reference to the judgment of Isaacs J in O'Keefe v Williams.[27] Isaacs J said, rejecting an objection of the defendant to an application by the plaintiff to amend the declaration:[28]

"... there being nothing but the merest technicality in the objection, no possible prejudice to the defendant being suggested, no really novel claim, issue or fact being advanced, the new count consisting simply of a better or fuller legal statement of uncontroverted facts, with the same results dependent upon the same circumstances, and upon almost the same formal allegations of fact, I fail to see how the amendment, if leading to a just determination of the matters really in issue, could at trial properly be refused."

25 In relation to limitation of actions issues, the High Court made it clear in Wardley Australia Ltd v State of Western Australia[29] that it did not approve of applications concerning limitation questions on an interlocutory basis. Mason CJ, Dawson, Gaudron and McHugh JJ said:[30]

"We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question."

26 As became clear in the course of submissions and discussions in the hearing of these applications, the plaintiffs are likely to have put against them by the defendant the argument that as the Capital Preservation Strategy is sought to be pleaded by reference to the affidavit of Scott Tyne sworn on 3 March 2010, it suffers from an argument that it is a strategy developed with the benefit of hindsight and, put less politely, might be regarded as something in the nature of a recent invention. Consequently, the defendant foreshadowed an attack on the basis of the pleading as contained in the proposed paragraph 14D, the consequential pleading in proposed paragraphs 14E to 14I and the proposed amendment to paragraph 15 (whereby a reference to the pleadings contained in proposed paragraph 14I was included), for the purpose of providing a basis for assessment of damages and, hence the determination of outstanding issues, in whole or in part, as remitted to the Trial Division by the Court of Appeal. This position was an aspect of the defendant's overall submissions, as indicated above, that the plaintiffs' proposed further allegations and claims are hopeless.

27 As I have indicated, these applications and proceedings return to the Trial Division with a long history involving, as the plaintiffs submitted, something over 40 sitting days before Redlich J, and a subsequent appeal. A multiplicity of complex factual and legal issues were raised at trial, and also considered on appeal. In my view, it is not appropriate that I should attempt to deal with the objections raised by the defendant to the proposed pleadings on the basis of res judicata, issue estoppel, Anshun estoppel or otherwise on an application to amend pleadings without the benefit of a comprehensive examination of matters previously and currently in issue in the continued trial of this matter, as a result of the orders of the Court of Appeal.

28 The authorities are clear that pleadings are not an end in themselves and are, rather, a means of ensuring that real issues of controversy are raised for determination in a way that is procedurally fair, both to a plaintiff and a defendant. This allows claims and defences to be clearly articulated, granting parties an opportunity to present their case properly prepared, on clear notice of allegations and defences raised in the proceedings. On this basis, the authorities clearly establish that, absent extraordinary circumstances, leave to amend will be granted. Thus, the "general practice" of Lord Justice Bramwell, in Tildesley v Harper was:[31]

"to give leave to amend unless I have been satisfied that the party applying was acting mala fide, or that, by his blunder, he had done some injury to his opponent which could not be compensated for by costs or otherwise."

Similar sentiments were echoed in the passage of Isaacs J in O'Keefe v Williams,[32] extracted above.[33] Generally, where a party can be compensated (for example, by the provision of costs or by an adjournment), amendment will be allowed.[34]

29 Naturally, unnecessary and hopeless amendments should not be permitted where the result is to inhibit the ability of the opposing party to prepare its case by way of claim or defence, whether as a result of obfuscation of issues, or by an unnecessary burden being imposed by way of costs of preparation and costs of a trial of a matter that is more lengthy and complex than would otherwise have been required if pleadings were more constrained or more focused. Thus, amendment will not be allowed if it is "so obviously futile that it would be struck out if it had appeared in an original pleading".[35] However, in the circumstances of this proceeding, I am of the opinion that it would be inappropriate to prevent the plaintiffs raising the matters they seek to raise in the proposed amendments to the existing statement of claim.

30 To the extent that the limitation of actions issues may arise, I am of the view that the warning in Wardley's case should be heeded, and that these issues are more properly determined at trial.

31 In terms of burden to the defendant, I am of the opinion that if the defendant's position that the claims are hopeless is correct, then the matters raised will be able to be disposed of quite expeditiously at the further trial.

32 For these reasons, I give leave to the plaintiffs to amend the existing statement of claim as set out in the schedule to the summons dated 9 March 2010.

33 By summons dated 16 September 2009, the defendant applied to strike out certain parts of the statement of claim in the 2009 proceedings. Leave was granted to the plaintiff to file an amended statement of claim, and this was filed by it on 9 February 2010. The defendant applied by summons dated 9 March 2010 to dismiss or strike out certain parts of the amended statement of claim, as set out in this summons.

34 The defendant's summons sought an order pursuant to Order 23.01(c) of the Rules, which provides as follows:

"23.01 Stay or judgment in proceeding

(1) Where a proceeding generally or any claim in the proceeding -

...

(c) is an abuse of the process of the Court -

the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim."

Reliance was also placed on the inherent jurisdiction of the Court to prevent abuses of the processes of the Court.

35 When a purpose of bringing proceedings is not to prosecute them to conclusion but to obtain some advantage beyond that which the law offers, the proceedings may be said to be brought for an improper purpose, and thereby constitute an abuse of process of the Court.[36]

36 In addition to the power pursuant to the Rules, it is clear that courts have an overriding inherent jurisdiction to control their own processes to prevent injustice:[37]

"Even without the benefit of [the equivalent to Order 23.01 in Victoria] there is little doubt that the court has an implied incidental power to control its own process and to prevent misuse of it. It is a power which ought to be very sparingly exercised and only in exceptional cases: see Lawrance v Lord Norreys (1890) 15 App Cas 210 at 219, per Lord Herschell; Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76 at 95, per Isaacs J. The possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed. An unmeritorious claim brought merely in order to put pressure on a respondent for commercial or other reasons would no doubt be treated as an abuse. Such a claim might also be attacked as frivolous or vexatious or as disclosing no reasonable cause of action. Those designations are not mutually exclusive. An attempt to litigate in the court a dispute or issue which has been resolved in earlier litigation in this or another court or tribunal may also, according to the circumstances, constitute an abuse of process even if not attracting the doctrines of res judicata or issue estoppel."

37 As indicated previously, the 2009 proceedings, like the 2002 proceedings, arise out of the prosperity bond policy investment arrangements established by the defendant. The plaintiff in the 2009 proceedings submitted that these proceedings concerned breaches subsequent to the facts and circumstances pleaded in the 2002 proceedings and were concerned, principally, with events which occurred in 2009. It is clear, however, from reading the amended statement of claim the subject of this application, that the facts and circumstances underpinning these events reach back to matters that occurred in June and November 2000.[38]

38 The defendant submitted that many of the issues raised in the amended statement of claim in the 2009 proceeding are now precluded by reason of res judicata, or cause of action estoppel, because the cause of action is merged in the judgment already given in the 2002 proceeding, and no longer has any independent existence.[39] Alternatively, the defendant submitted that many of these issues are precluded by what has become known as Anshun estoppel.[40]

39 The defendant submitted that the relevant facts and circumstances relied upon in the 2009 proceedings have already been adjudicated upon in the 2002 proceedings, and are consequently now precluded from being raised and re-litigated on the basis of res judicata or action estoppel. In the alternative, the defendant submitted that, to the extent that these claims can be regarded as new claims, they are claims that are now precluded because they could and should have been determined previously, and thus come within the principles articulated in Port of Melbourne Authority v Anshun Pty Ltd.[41]

40 The defendant also made submissions as to the appropriate procedure by which a claim of res judicata is to be established:[42]

"5. An appropriate procedure by which to claim res judicata is -

(a) to plead the defence[43] and then

(b) take out a summons that the pleading be struck out or decided as a preliminary issue/separate question.

See Effem Foods Pty Ltd v Trawl Industries of Aust Pty Ltd [1993] FCA 342; (1993) 43 FCR 510 per Northrop and Lee JJ at 520. Alternatively, the defendant may seek a summary stay of the proceeding (as an abuse of process) or that it be struck out: Effem Foods v Trawl Industries per Burchett J at 531-532, following Chamberlain v FCT [1988] HCA 21; (1988) 164 CLR 502 at 510-511 and cases cited there. The usual rules about a clear case being required to persuade the Court to strike out remain: Effem Foods v Trawl Industries at 532, Commonwealth Bank of Australia v White (No. 4) [2001] VSC 511 at [46], but the Courts do not require the plea of res judicata to await ultimate trial: Dallal v Bank Mellat [1986] 1 QB 441 per Hobhouse J at 451-452; Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 (PC) at 590-591."

41 Further, in relation to res judicata, the defendant submitted that the authorities relating to this defence are examined in Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd by Gummow J.[44] The defendant noted, in particular, that Gummow J held in that case that res judicata or cause of action estoppel applied as "the one factual matrix has generated the controversy which is given legal form in the two pleadings".[45] The relationship between res judicata and issue estoppel was considered and summarised by the High Court in Port of Melbourne Authority v Anshun Pty Ltd[46] by Gibbs CJ, Mason and Aickin JJ, as follows:[47]

"The distinction between res judicata (in England called 'cause of action estoppel') and issue estoppel was expressed by Dixon J in Blair v Curran[48] in these terms: '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.'

The distinction was restated by Fullagar J in his dissenting judgment in Jackson v Goldsmith.[49] His Honour expressed the rule as to res judicata by saying: '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."' His Honour went on to discuss issue estoppel, citing the comment of Dixon J in Blair v Curran[50]: '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 difference between res judicata (cause of action estoppel) and issue estoppel has been expressed in similar terms in the House of Lords - see Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2).[51]"

42 The defendant also relied upon the principle as to the desirability of finality in the proceedings, recently re-emphasised by the High Court in Aon Risk Services Australia Ltd v Australian National University.[52]

43 Applying the principles to which reference has been made, the defendant applied to strike out those parts of the amended statement of claim that rely on conduct at the time of issue of the prosperity bond policy to the plaintiffs. The defendant submitted that these parts of the amended statement of claim, and those parts of the amended statement of claim that rely on conduct prior to 2009 as the basis for a cause of action, repeat allegations made in the 2002 proceeding. Further, the defendant submitted that the original statement of claim in the 2009 proceeding repeated verbatim, or very close to verbatim, many of the allegations in the statement of claim in the 2002 proceedings. The defendant submitted that the present amended statement of claim in the 2009 proceeding suffers from the same problem.

44 The defendant, having made reference to the authorities and to the general basis upon which it submitted that parts of the amended statement of claim objected to should be barred, the defendant directed attention to particular paragraphs in the amended statement of claim. These were the subject of more particular submissions as to which principle or principles, to which reference has been made, are said to make the particular pleading objectionable and liable to be struck out.[53] The plaintiffs' submissions in support of the amended statement of claim are, in my view, summarised in the following paragraph of its submissions:[54]

"4. The plaintiff's position is that it is entitled to claim in the 2002 proceeding damages in lieu of specific performance over the life of the policy.[55] If this position is ultimately found to be correct or is conceded by the defendant, the plaintiff will not press its claim for damages in respect of the 'waiver period continuing breaches' (paragraph 48 of the ASOC). The plaintiff will however continue to rely on those breaches in support of its claim that the defendant by its ongoing conduct repudiated the plaintiff's policy.

5. The plaintiff accepts that, to the extent it succeeds in its claim in the 2002 proceeding for damages in lieu of specific performances over the life of the policy, the plaintiff will not be entitled to recover damages for the same losses in the 2009 proceeding."

45 In relation to the res judicata point raised by the defendant, the plaintiffs submitted that there was no basis for the defendant's assertion that the decision of Redlich J in the 2002 proceeding, that the defendant had not repudiated the prosperity bond policy, makes res judicata any claim in the 2009 proceeding that the relevant terms were conditions, breach of which would entitle the plaintiff to terminate the policy.[56]

46 In relation to Anshun or issue estoppel, the plaintiffs submissions included the following:[57]

"16. The defendant's real argument in relation to paragraphs 12 and 14 appears to be that the question of whether or not the terms relating to switching were conditions that could have been raised in the 2002 proceeding in relation to the breaches which were the subject of that proceeding and therefore cannot now be raised in the 2009 proceeding in relation to the breaches which are the subject of this proceeding.

17. The defendant's argument inappropriately seeks to concatenate the principles of res judicata and Anshun estoppel.

18. The principle of res judicata prevents a party seeking to re-open in new proceedings questions of law or fact which have been determined between the parties in earlier proceedings.

19. Anshun estoppel prevents a party seeking to raise in a new proceeding issues which could and should have been raised in an earlier proceeding in relation to the same facts but were not.

20. It is misconceived for the defendant to argue that because the plaintiff could have raised the issue of whether or not the special terms were conditions in the 2002 proceeding (but did not) the plaintiff is now precluded from raising that issue in relation to fresh breaches of the policy subsequent to the breaches the subject of the 2002 proceeding.

...

23. Their Honours noted[58] that one of (sic) key tests as to whether a party will be estopped from bringing an action is whether or not if the action succeeds this will result in a judgment which conflicts with an earlier judgment. If the plaintiff establishes that the special terms were conditions, this will not result in a judgment which conflicts in any way with the earlier judgment of Redlich J or the decision of the Court of Appeal."

47 The remainder of the plaintiffs' submissions addressed the particular matters raised by the defendant in support of its strike out application.[59]

48 In my opinion, having regard to the nature of the 2002 proceedings to which the 2009 proceedings clearly relate, it is not appropriate that the matters raised by the defendant in its strike out application should be dealt with in an application of this kind, where there is not sufficient opportunity to consider the complex facts and law raised in these and the related proceedings. Consequently, for the same reasons that I have decided that it is appropriate to allow amendment of the statement of claim in the 2002 proceedings on the application of the plaintiffs, I have decided that it is not appropriate to accede to the strike out application, in whole or in part, made by the defendant in relation to the 2009 proceedings.

49 For these reasons, I will make an order giving leave to the plaintiffs to amend the statement of claim in the 2002 proceedings in terms of the Further Amended Statement of Claim as set out in the schedule to the plaintiffs' summons dated 9 March 2010. I will also make an order for dismissal of the defendant's summons to strike out parts of the statement of claim in the 2009 proceeding, as set out in its summons dated 9 March 2010. I will hear the parties in relation to the issue of costs.

[1] See ACN 074 971 109 (as Trustee for the Argot Unit Trust), Pegela Pty Ltd, Thomas Oates and Paul Oates v National Mutual Life Association of Australasia Limited [2006] VSC 507.

[2] ACN 074 971 109 (as Trustee for the Argot Unit Trust) & Anor v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; (2008) 21 VR 351.

[3] ACN 074 971 109 (as Trustee for the Argot Unit Trust) and Pegela Pty Ltd v National Mutual Life Association of Australasia Ltd (No 2) [2009] VSCA 24.

[8] [2009] HCA 27; (2009) 239 CLR 175.

[9] [2009] HCA 27; (2009) 239 CLR 175 at 185, [14].

[10] An example of this kind of case is Nottage v Jackson (1883) 11 QBD 627 at 638.

[11] [1887] VicLawRp 162; (1887) 13 VLR 933.

[12] [1887] VicLawRp 162; (1887) 13 VLR 933 at 939, 940 per Williams and Kerferd JJ.

[13] Hipgrave v Case (1885) 28 Ch D 356 at 361 per Earl Selborne LC.

[14] [2009] HCA 27; (2009) 239 CLR 175 at 205, [71].

[15] [2009] HCA 27; (2009) 239 CLR 175 at 192, [31] and [32].

[16] Submissions of Defendant regarding Plaintiffs' Further Amendment Application, dated 7 April 2010, at [8].

[17] [2009] HCA 27; (2009) 239 CLR 175.

[18] Referring to the affidavit of Scott Tyne, 3 March 2010.

[19] See Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406 at 422 (Gummow J).

[20] See Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[21] Submissions of Defendant regarding Plaintiffs' Further Amendment Application, dated 7 April 2010, at [17].

[22] Thus in paragraph 14E "notices to give effect to the Keller Strategy ... in accordance with the terms of the Plaintiffs' policies" refers to a null set.

[23] Submissions of Defendant regarding Plaintiffs' Further Amended Application, dated 7 April 2010, at [18].

[24] Submissions of Defendant regarding Plaintiffs' Further Amended Application, dated 7 April 2010, at [20].

[25] Submissions of defendant regarding Plaintiffs' Further Amended Application dated 7 April 2010 at [21] referring to Farrands The Law of Options and Other Pre-Emptive Rights (2010), pp 106-107, BS Stillwell & Co Pty Ltd v Budget Rent-A-Car System Pty Ltd [1990] VicRp 52; [1990] VR 589 (FC) at 595, 602-603; Bowman v Durham Holdings Pty Ltd [1973] HCA 55; (1973) 131 CLR 8; Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 76 WN(NSW) 72 (FC).

[26] Referring to Order 36.01(6), Agtrack v Hatfield [2003] VSCA 6; (2003) 7 VR 63 and Simplot Australia Pty Ltd v PSL Industries (2003) 7 VR 206.

[27] [1910] HCA 40; (1910) 11 CLR 171.

[28] [1910] HCA 40; (1910) 11 CLR 171 at 204-5.

[29] [1992] HCA 55; (1992) 175 CLR 514.

[30] [1992] HCA 55; (1992) 175 CLR 514 at 533-34.

[31] (1878) 10 CH D 393 at pp 396-7.

[32] [1910] HCA 40; (1910) 11 CLR 171 at 204-205.

[34] Commonwealth v Verwayen (1990) 170 CLR 394 at 456, 464, 482.

[35] Horton v Jones (No 2) (1939) 39 SR (NSW) 305, at 310 (per Jordan CJ).

[36] See Coe v The Commonwealth [1993] HCA 42; (1993) 68 ALJR 110.

[37] Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275, at 279.

[38] See, for example, paragraphs 7, 9, 16 (November 2003), 19, 20, 21, 22, 24, 27, 29, 30, 33.

[39] See Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532 (Dixon J); Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466-468 (Fullagher J) "although dissenting his exposition can be treated as authority": Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd [1993] FCA 342; (1993) 43 FCR 510 at 513 (FC); Chamberlain v FCT [1988] HCA 21; (1988) 164 CLR 502 at 511.

[40] See Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589; and see Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406 at 422-423.

[41] [1981] HCA 45; (1981) 147 CLR 589.

[42] Submissions of Defendant regarding Strike Out Application, dated 9 March 2010, at [5].

[43] Stating the facts on which it is based: Effem Foods Pty Ltd v Trawl Industries of Aust Pty Ltd [1993] FCA 342; (1993) 43 FCR 510 per Northrop and Lee J at 519-520.

[44] [1992] FCA 272; (1992) 36 FCR 406 at 418 (Gummow J).

[45] [1992] FCA 272; (1992) 36 FCR 406 at 422.

[46] [1981] HCA 45; (1981) 147 CLR 589.

[47] [1981] HCA 45; (1981) 147 CLR 589 at 597.

[48] [1939] HCA 23; (1939) 62 CLR 464 at 532.

[49] [1950] HCA 22; (1950) 81 CLR 446 at 466.

[50] [1939] HCA 23; (1939) 62 CLR 464 at 466.

[51] [1967] 1 AC 853 at 913, 964, et seq.

[52] [2009] HCA 27; (2009) 239 CLR 175.

[53] See Submissions of Defendant regarding Strike Out Application, dated 9 March 2010, [13] to [24].

[54] Submissions of the Plaintiff regarding Strike Out Application, dated 7 April 2010, [4] and [5].

[55] See the plaintiffs' March 2010 submission in the 2002 proceeding.

[56] See Submissions of the Plaintiff regarding Strike Out Application, dated 7 April 2010, at [11], and see [10] and [12] to [15] of the submissions.

[57] Submissions of the Plaintiff regarding Strike Out Application, dated 7 April 2010, [16] to [20] and [23]; and see also [21], [22] and [24] to [26].

[59] See Submissions of the Plaintiff regarding Strike Out Application, dated 7 April 2010, [27] to [38].