Hassan v Hassan

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 MASTER: The defendant is the uncle of the plaintiff. In or about December 1990, he guaranteed a loan granted by the State Bank of New South Wales (State Bank) to the plaintiff. The loan had been sought to pay for flying lessons. 2 There was default under the loan. The State Bank brought proceedings in the Local Court against both the plaintiff and the defendant (the 1994 proceedings). The proceedings were not defended and the State Bank obtained default judgment in the sum of $33,397.30. In the 1994 proceedings, the defendant did not bring any claim for indemnity against the plaintiff. 3 Subsequently, the defendant paid out the State Bank and sought to recover the moneys paid from the plaintiff. He brought proceedings against the Plaintiff in the Local Court (the 2000 proceedings). The proceedings were defended. 4 Certain legal argument took place before Curran LCM on what has been described as a preliminary point. He made a determination on what was argued. In substance, he appears to have rejected what was put by the plaintiff and to have decided that the proceedings were not barred by reason of estoppel. 5 The court has been informed by the parties that subsequently the learned Magistrate proceeded to a final determination of the dispute. He found in favour of the defendant. 6 By Summons filed on 21 November 2003, the plaintiff challenges the preliminary decision only by way of appeal. 7 The Summons alleges three grounds of appeal. They are as follows:- "1. That the learned Magistrate erred in law in not finding that the defendant's claim against the plaintiff could not be maintained because of the principle of res judicata. 2. That the learned Magistrate erred in not finding that the defendant's claim was issue estopped against the plaintiff because the defendant did not cross claim against the plaintiff pursuant to s5 of the Law Reform (Miscellaneous Provisions) Act 1946 when the plaintiff and the defendant were sued by the State Bank of New South Wales. 3. The learned Magistrate erred in law in not properly applying the decision of the High Court of Australia in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589." 8 The Summons was given a special fixture for a hearing to take place on 22 April 2004. The hearing took place on that day. 9 It is common ground that relief can only be granted to the plaintiff if there has been error of law. The plaintiff bears the onus of demonstrating error of law that justifies the disturbing of the decision of the Local Court. 10 The parties have made written submissions. These submissions have been supplemented by oral argument. 11 It is unfortunate that a dispute between relatives concerning a sum that is not large should become the vehicle that sees the incurring of significantly disproportionate costs. Be that as it may, the court is left with no alternative but to proceed with the hearing of the appeal. 12 I now turn to the arguments put on behalf of the plaintiff. Broadly speaking, this case relies on the provisions of s 3 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act) and what has flowed from what was said in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. In support of the arguments, a number of matters were put forward. It was said that both the plaintiff and the defendant were parties to the 1994 proceedings. It was said that identical facts were involved in both proceedings. It was said that s 3 obliged the plaintiff to raise the question of indemnification in the 1994 proceedings. It was said that it was inconsistent for him to litigate the question in other proceedings. Accordingly, it was said that he cannot subsequently come back and seek to litigate the indemnity question in the 2000 proceedings. 13 Although the Summons contains three grounds of appeal, ground 3 was the subject of the argument that took place before this Court. The court was informed that grounds 1 and 2 were included merely because of the difficulties had in categorizing what has been described as the Anshun doctrine. 14 For completeness, it can be added that as the question of indemnification had not been earlier litigated between the parties, there could be neither issue estoppel nor res judicata in the circumstances of this case. 15 In the course of argument, the court was referred to numerous decided cases (including Jelson (Estates) Ltd v Harvey [1983] 1 WLR 1401; ANZ Banking Group Ltd v Turnbull & Partners Ltd & Ors (1991) 33 FCR 265; Sandtara Pty Ltd v Abigroup Ltd & Ors (1997) 42 NSWLR 5; Anthony Developments P/L v Marsden [1999] NSWSC 472 and Bazos and Anor v Doman and Ors [2001] NSWCA 347). 16 It is common ground that it was open to the defendant to raise the question of indemnification in the 1994 proceedings. 17 There is issue between the parties as to whether or not the entitlement to raise that question in the proceedings arose by reason of the enactment of s 3. In my view, this is a question that need not be determined in this case. It suffices to add that there is authority to support the view that prior to the enactment of s 3 the implied right of indemnity could be pursued at common law by suing on a common money count. There is no dispute that under the Act and Rules that govern the Local Court, it was open to the defendant to raise the question of indemnification in the 1994 proceedings. 18 Section 3 appears in Part 2 of the Act under the heading "Alternative defendants and third party procedure". Part 2 applies to all courts of competent jurisdiction other than the Supreme Court and the District Court. 19 If it be assumed that s 3 has present application, I do not accept the submission that it required the defendant to litigate the question of indemnification in the 1994 proceedings. In my view, it merely empowers the said courts of competent jurisdiction to entertain and grant relief in respect of third party litigation that falls within the scope of the section. 20 I now turn to what has been said in respect of the application of the Anshun doctrine. 21 In Anshun, at pp 602 - 603, it was observed that:- "In this situation we would prefer to say that 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." 22 In Orbit Travel Services & Ors v The Australian Federation of Travel Agents & Anor [2000] NSWSC 127, the following observations were made:- "11 There is much uncertainty that surrounds Anshun . In Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at p 355, it was said that the scope of Anshun remains a matter of some debate. More recently it has been said that one thing that is clear about Anshun is that there is much that is unclear (71 ALJ 934 at 942). In Macquarie Bank Limited v National Mutual Life Assurance of Australia Limited and Others (1996) 40 NSWLR 543 at p 558 Clarke JA (with whom Priestley JA agreed) observed that the appropriate order is a stay of proceedings and that the court retains a discretion not to grant a stay if special circumstances exist. The Privy Council in Yah Tung Investment Co Ltd v Dao Heng Bank Ltd (1975) AC 581 at p 590 appears to take the approach that "special circumstances" and "unreasonableness" were separate issues. A contrary view was taken by the Federal Court ( Ling v Commonwealth of Australia (1996) 139 ALR 159)." 23 There is authority that treats the application of the doctrine as a discretionary exercise. There is also authority that suggests that the doctrine does not apply where the court has not gone into the merits of the case (see Bazos and Jelson). 24 In the present case, there had been no prior adjudication of any issues between the plaintiff and the defendant. In the 1994 proceedings, no issues at all were raised between the plaintiff and the defendant. There was merely the entry of default judgment by the creditor against both of them (one as principal debtor and one as guarantor). In Anshun itself, the relevant question was one of contractual indemnity and the parties had ventilated issues of contribution. 25 In Anshun it was said at p604:- "Taking into consideration the relevant factors we conclude that the Full Court was right in holding that there was an estoppel. The matter now sought to be raised by the Authority was a defence to Anshun's claim in the first action. It was so closely connected with the subject matter of that action that it was to be expected that it would be relied upon as a defence to that claim and as a basis for recovery by the Authority from Anshun. The third party procedures were introduced to enable this to be done. If successful, the indemnity case would have obviated an inquiry into contribution. If reserved for assertion in a later action, it would increase costs and give rise to a conflicting judgment." 26 The authorities demonstrate that the two proceedings must also involve the same or substantially the same facts (see inter alia Bozos). In the present case, questions such as the implied indemnity and the failure to indemnify were not involved in the 1994 proceedings. 27 There was no prospect of competing judgments. There was no judgment on the question of indemnification in the 1994 proceedings. 28 Whatever may be unclear, it seems to be clear that the application of the doctrine involves the court in a consideration of the circumstances of the particular case before it. Also, it has to be unreasonable for the party not to raise the question in the earlier proceedings. 29 Leaving aside other considerations, it seems to me that the plaintiff failed to demonstrate that it was unreasonable not to raise the question in the 1994 proceedings. 30 Why it was not so raised in those proceedings can only be a matter for speculation. No evidence on this matter was placed before the Local Court. It suffices to say that there may been a variety of reasons why the defendant did not litigate the question in the 1994 proceedings. For example, he may have legitimately considered that the principal debtor would satisfy the judgment debt and that there was no need to pursue recovery against his nephew. 31 Whatever may be the correct analysis of the Anshun doctrine, for the reasons expressed, I am satisfied that it has no application whatsoever in the circumstances of the case now before the court. 32 In my view, the plaintiff has failed to demonstrate a basis for the disturbing of the decision of the learned Magistrate. In my view, he was correct in rejecting the submissions made by the plaintiff. Accordingly, the appeal is doomed to failure. 33 The Summons is dismissed. The plaintiff is to pay the costs of the Summons.

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