Ilvariy Pty Ltd trading as Craftsman Homes Northern Rivers v Moss

Arbitration (Foreign Awards and Agreements) Act 1974 LEGISLATION CITED : Home Building Act 1989 Home Building Regulation 1997

Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 Brewarrina Shire Council v Beckhaus Civil Pty Ltd & 1 Or [2005] NSWCA 248 Chamberlain v Deputy Commissioner of Taxation (1991) 28 FCR 21 Chamberlain v Deputy Federal Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (in Liquidation) [1993] FCA 342; (1993) 43 FCR 510 Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287 CASES CITED : Melbourne Money Pty Ltd v Bryant [1994] ASC 56-275 Noel Ling v Commonwealth of Australia [1996] FCA 1646; (1996) 68 FCR 180 O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332 Zavodnyik & Ors v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457

Ilvariy Pty Ltd trading as Craftsman Homes Northern Rivers (Plaintiff) Wayne Robert Moss (First Defendant) PARTIES : Jaclyn Burrows-Moss (Second Defendant) Vero Insurance Ltd (Third Defendant) Consumer, Trader & Tenancy Tribunal of NSW (Fourth Defendant)

S Bell (Plaintiff) COUNSEL : M McCall (First Defendant, Second Defendant) P J Bambagiotti (Third Defendant) Submitting appearance (Fourth Defendant)

G J Donaghy & Company Solicitors (Plaintiff) SOLICITORS : Hosie & Partners Solicitors (First Defendant, Second Defendant) Mills Oakley Lawyers (Third Defendant) Crown Solicitor's Office (Fourth Defendant)

LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW

LOWER COURT JUDICIAL OFFICER : Senior Member Connolly

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

030037/07 Ilvariy Pty Limited trading as Craftsman Homes Northern Rivers v Wayne Robert Moss & Ors

JUDGMENT 1 HIS HONOUR: Wayne Moss and Jaclyn Burrows-Moss (hereinafter "Mr and Mrs Moss") contracted with Ilvariy Pty Limited trading as Craftsman Homes Northern Rivers ("CHNR") for CHNR to build Mr and Mrs Moss a home. On the same date, 18 November 1999, Vero Insurance Ltd ("Vero") insured the building works. There were defects in the building work and Mr and Mrs Moss refused to pay an amount that, but for the alleged defects, would have been payable under the contract. CHNR sued in the District Court of NSW for the amount owing. After the conclusion of the District Court proceedings, Mr and Mrs Moss made application to the Consumer, Trader & Tenancy Tribunal ("the Tribunal"). 2 CHNR and Vero submitted to the Tribunal that it was precluded from proceeding with its application because of the earlier proceedings in the District Court of NSW. The Tribunal decided that it could proceed and CHNR has appealed to this Court from that decision. Facts & Background 3 The Tribunal, at [18] of its Decision of 14 February 2007, summarised the contractual and procedural background to the issue raised before it. With some very minor amendments, the following outline of the facts is taken from the decision of the Tribunal. 4 As already stated, on 18 November 1999, CHNR contracted with Mr and Mrs Moss to build their home for a sum of $250,569. On the same date, Vero (through its Agent Home Owner's Warranty) issued a certificate of insurance in respect of the works to be carried out. 5 CHNR commenced construction of the home in early 2000 and in mid-2000 a dispute arose between CHNR and Mr and Mrs Moss. 6 On or about 27 June 2000, CHNR claimed payment for Stage 3 of the contract works, being an amount of $62,642.25. Mr and Mrs Moss refused to pay the amount on the basis that Stage 3 had not been reached and/or that the work that had been performed contained extensive defects. 7 On 30 June 2000, Mr and Mrs Moss purported to suspend the progress of the works and on 7 July 2000, they purported to terminate the contract. 8 On 8 August 2000, Mr and Mrs Moss made a claim on Vero. In that claim, Mr and Mrs Moss relied upon the reports of the Ballina Shire Council dated 25 July 2000 and TG Hollyoak Consulting Pty Ltd dated 3 August 2000. 9 On 1 March 2002, Mr and Mrs Moss appealed Vero's deemed refusal of the claim to the Fair Trading Tribunal (the jurisdiction of which is now exercised by the Tribunal). 10 On or about 15 September 2002, CHNR commenced proceedings against Mr and Mrs Moss in the District Court of NSW at Lismore for the amount set out above, being the amount claimed for Stage 3 of the contract work (including variations). In October 2000, Mr and Mrs Moss filed a defence and cross-claim to that action. Mr and Mrs Moss denied indebtedness in respect of the Stage 3 payment. Further, Mr and Mrs Moss alleged, in the cross-claim, numerous and extensive defects in the work performed by CHNR. The alleged defects correspond to the matters raised in the report of Ballina Shire Council and TG Hollyoak, referred to above. Mr and Mrs Moss also relied on the defective work in their defence. 11 On 5 March 2002, Mr and Mrs Moss, in accordance with the Rules of the District Court, filed and served a Scott Schedule setting out the defects and estimating the rectification costs. The total estimated rectification cost was $247,392. 12 On 3 May 2002, the District Court proceedings were referred to a referee. 13 On 19 May 2002, Mr and Mrs Moss filed and served an amended cross-claim seeking damages of $247,392. 14 On 22 May 2002, the Fair Trading Tribunal determined that it had jurisdiction to deal with the appeal, but raised the difficulty of duplication of proceedings. 15 On 29 May 2002, Messrs Hosie & Partners, solicitors for Mr and Mrs Moss, forwarded a letter to Messrs McLachlan Chilton, solicitors for Vero, in which they advised that they had instructions to join Vero (either by that name or its predecessor Royal & SunAlliance) to the District Court proceedings. 16 On 30 May 2002, Messrs McLachlan Chilton replied advising that the insurer agreed to be bound by the referee's findings. 17 In early July 2002, the Fair Trading Tribunal issued orders, by consent, discontinuing the proceedings by Mr and Mrs Moss against the insurer with no order as to costs. It seems that these consent orders arose out of the agreement by Vero to be bound by the referee's findings in the District Court. 18 On 5, 6 and 7 June 2002, the referee conducted an expert's conclave to determine the accuracy of allegations of incomplete works and the 82 items of alleged defective work contained in the Scott Schedule. 19 On 5 June 2002, Mr and Mrs Moss lifted the suspension of works (and, it seems, rescinded its notice of purported termination of the contract). On 6 June 2002, CHNR agreed to return to the site and formally affirmed the contract. 20 On 7 June 2002, the referee adjourned proceedings as a result of the actions of Mr and Mrs Moss and CHNR on 5 and 6 June 2002 respectively. 21 On 12 September 2002, the referee conducted a meeting of the experts. Mr Terry Hollyoak (qualified by Mr and Mrs Moss) and Mr Max McDonald (qualified by CHNR) prepared a joint report. On 13 September 2002, Mr and Mrs Moss discontinued their cross-claim against CHNR. Costs were reserved. 22 On 18 September 2002, Mr Zakos, the referee appointed for the purpose of the District Court proceedings, inspected the site for the purpose of determining whether Stage 3 had been reached. On 18 September 2002, Mr Zakos determined that Stage 3 had not been reached because of defects in the work. 23 On 26 November 2002, Mr Zakos published his report arising from the reference from the District Court of 3 May 2002. 24 CHNR had returned to the building site between June 2002 and November 2002, but had performed no work on the site since late November 2002. 25 On 18 December 2002, his Honour Judge Twigg QC DCJ issued orders in relation to the District Court proceedings. The proceedings were dismissed. His Honour Judge Twigg entered judgment for Mr and Mrs Moss on the statement of claim of CHNR. On the reserved costs of the discontinued cross-claim, Twigg DCJ also ordered CHNR to pay the costs of Mr and Mrs Moss. 26 On 3 February 2003, Mr and Mrs Moss issued a further letter purporting to terminate the building contract. 27 On 24 May 2004, Mr and Mrs Moss commenced proceedings before the Tribunal against Vero in respect of the claim made upon it by them on 8 August 2000: see [8] above. Mr and Mrs Moss argued, before the Tribunal, that Vero's failure to determine their claim of 8 August 2000 gave the Tribunal jurisdiction by way of an appeal in respect of a deemed refusal pursuant to clause 54 of the Home Building Regulation 1997 and s 48A(2) of the Home Building Act 1989. The parties were legally represented before the Tribunal. Vero joined CHNR as a party to the proceedings before the Tribunal, without the consent of Mr and Mrs Moss. 28 Pursuant to notice given by Vero on 27 August 2004, Vero made application that the proceedings before the Tribunal be struck out on the basis of res judicata and/or issue estoppel. Submissions were also made as to the existence of an accord and satisfaction, which latter submission is, to the extent that it may give rise to an independent cause of action, irrelevant for present purposes. 29 On 12 December 2006, the Tribunal, constituted by Senior Member R Connolly, heard the strikeout application and on 14 February 2007, issued a decision dismissing the strikeout application and allowing the proceedings commenced by Mr and Mrs Moss to continue. It is that decision of the Tribunal of 14 February 2007 that is the subject of the appeal to this Court. The fourth defendant, the Consumer, Trader & Tenancy Tribunal, most appropriately, in circumstances where there is a contradictor, submits to any order of the Court, except an order for costs. 30 As already indicated, the referee (and the District Court) had held that there were defects in the work performed by CHNR and that such defects had resulted in Stage 3 of the building contract not being reached. The District Court did not hear and determine the cross-claim for damages on its merits. 31 Three grounds are raised on this appeal that, it is said, prevent Mr and Mrs Moss from proceeding to judgment in the Tribunal: res judicata and issue estoppel; Anshun estoppel; and merger of the claim in the judgment of the District Court. 32 For the purpose of this judgment, I accept that the defects alleged before the Tribunal are the same, or substantially the same, as those that were alleged before the District Court. Res Judicata, Issue Estoppel and Merger 33 Res judicata (sometimes called cause of action estoppel) prevents a cause of action being agitated again between the same parties. The Court, faced with such a submission, is required to define precisely both the parties in the earlier proceedings and the issues agitated between them. 34 The most oft-quoted passage on res judicata and issue estoppel is that contained in the reasons for judgment of Dixon J in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532, in which his Honour says: "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. In the phraseology of Coleridge J. in R. v. Inhabitants of the Township of Hartington Middle Quarter (1855) 4 E. & B. 780, at p. 794 [119 E.R. 288, at p. 293], the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.

In the phraseology of Lord Shaw , 'a fact fundamental to the decision arrived at' in the former proceedings and 'the legal quality of the fact' must be taken as finally and conclusively established ( Hoystead v. Commissioner of Taxation (1926) A.C. 155). But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation." (Per Dixon J at 532-533.) 35 In relation to the cross-claim, res judicata, issue estoppel and merger do not arise from its determination. There was a discontinuance by the cross-claimant, Mr and Mrs Moss, and there has been no judgment on the merits. While this term is not confined to a full hearing on evidence leading to findings of fact, it clearly does not include the determination of a proceeding (or a step in a proceeding) on the basis that the initiating party has discontinued: Melbourne Money Pty Ltd v Bryant [1994] ASC 56-275. 36 The statement of claim and its dismissal raise different issues. The statement of claim alleges a contract (to which reference has already been made) and the completion of work to a particular stage. The defence to that claim alleges defective work of such a degree and substance that Stage 3 of the contract had not, in fact, been reached. The defence was upheld. The parties to the proceedings were Mr and Mrs Moss, as the defendants in the District Court, and CHNR, as the plaintiff in the District Court. Vero was not a party to the District Court proceedings. 37 Taking the broadest possible view of the matters determined by the District Court on the statement of claim by CHNR (but, to the extent that they are different, not the cross-claim), the matters determined by the District Court were: the existence of a contract for the performance of building work between CHNR and Mr and Mrs Moss; the performance of work by CHNR under that contract; the existence of defects in the work performed; that the consequence of those defects was that Stage 3 of the contract had not been reached; and, therefore, that the money claimed by CHNR was not payable. 38 The requirement for the parties to the proceedings to be identical may not, in circumstances of subrogation of interests pursuant to an insurance contract, require the treatment of the insurer's interests as different to that of the insured: see Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271; Effem Foods Pty Limited v Trawl Industries of Australia Pty Limited (in Liquidation) [1993] FCA 342; (1993) 43 FCR 510. Vero would not be liable under its insurance policy, nor have the right of subrogation, for any claim by CHNR in the District Court proceedings. In other words, the interests of Vero did not coincide with the interests of CHNR in a cause of action for which CHNR were suing for work done under the contract. 39 It may have been different if the cross-claim had been pursued and determined. It is unnecessary for me to determine the issue of privity or whether, because of the difference in the parties, the District Court proceedings can give rise to res judicata or issue estoppel. There are more fundamental issues that would prevent res judicata and issue estoppel arising or the cause of action, now pursued, being merged in the earlier judgment. 40 First, the cause of action is not the same, either in substance or in form. The cause of action in the District Court was a cause of action based upon the contract between CHNR and Mr and Mrs Moss. The cause of action sued for payments under that contract. The proceedings before the Tribunal are proceedings based upon a liability under the contract between Mr and Mrs Moss and Vero. The joinder by Vero of CHNR, over the objection of Mr and Mrs Moss, does not alter that fundamental distinction. 41 Secondly, the factual allegations are different. In the District Court proceedings, the fundamental allegation is that Stage 3 of the contract had been reached. The defence, by alleging defects, denied that Stage 3 of the contract had been reached. The determination of the Court was that Stage 3 had not been reached. The existence of the defects was for a purpose confined to the determination of the factual issue in the proceedings, namely, whether Stage 3 had been reached, and not to define, with precision, the extent and value of the defects in the work already performed. 42 In other words, hypothetically, the District Court could have found that Stage 3 of the contract had been reached and the payments under the contract were due and payable, even though there were defects in the work already performed. In those circumstances, the defects would not have been to such an extent that the stage had not been reached. Such a finding would not prevent Mr and Mrs Moss seeking rectification of the defects, nor, in the case of a refusal of insurance claim, payment under the insurance scheme. "The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding. Here the indemnity cause of action was not litigated in the Soterales proceedings. The judgment in that case did not deal with that cause of action, though it evidently proceeded on the assumption that the Authority was not entitled to an indemnity.

For a similar reason this is not a case of issue estoppel in the strict sense. The Full Court was correct in deciding that the existence of an indemnity is a defence to a claim for contribution under s. 24 (1) (c) of the Wrongs Act and that the absence of an indemnity is not an ingredient in the cause of action for contribution. It was not a necessary step to the decision that Anshun was entitled to contribution for the Court to decide that the Authority was not entitled to an indemnity against Anshun: Carl Zeiss [1967] 1 AC, at p 965. Had the Authority pleaded the indemnity as a defence to Anshun's claim for contribution, a decision on that defence would have been a necessary step to the ultimate decision that Anshun was entitled to contribution. The defence of indemnity not having been raised, the judgment for Anshun did not involve a determination of that issue." ( Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 at 597-598, per Gibbs CJ, Mason and Aickin JJ.) 43 Further, in Anshun, Brennan J (as he then was) said: "Unless a judgment recovered after litigation between parties is reversed or set aside, it binds the parties and determines their rights and liabilities inter se according to its tenor…. No civil proceedings which impugn a judgment can be brought by parties bound by the judgment except proceedings to have it reversed or set aside…. An action to recover a second judgment giving more copious relief than the relief given by the first judgment cannot be brought merely because the evidence was not properly prepared in the first action … nor merely because some point was omitted from the argument then put to the court…. Both public policy and the interests of the litigants require that there should be an end to litigation as to a particular subject matter once a judgment determining the rights and liabilities of the parties as to that matter has been recovered.

The recovery of a judgment which declares or enforces rights or liabilities between parties inconsistent with an earlier judgment binding upon them is precluded by the operation of the rules of estoppel and res judicata. These rules may operate concurrently in particular cases according to the causes of action litigated and the issues arising in each proceeding.

There is an imprecision in the meaning of the term cause of action, which is sometimes used to mean the facts which support a right to judgment; sometimes to mean a right which has been infringed. Imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action. The foundation of the rule, whether it be termed res judicata, or cause of action estoppel or judgment recovered, is the merging of the cause of action in the judgment. In reference to res judicata, Dixon J. said in Blair v. Curran [1939] HCA 23; (1939) 62 CLR 464, at p 532: 'the very right or cause of action claimed or put in suit has … passed into judgment, so that it is merged and has no longer an independent existence …'

If cause of action is taken to mean a right, the rule is stated in terms of the passing of the right into judgment, and the rule precludes a party bound by the judgment from maintaining against another party bound by it any subsequent proceeding to recover a judgment giving a remedy to enforce or to compensate for an infringement of that right. The rule does not preclude litigation seeking a remedy to which a party is entitled in virtue of a different right from that which was first put in suit provided that the facts which support the right sued upon in the second action are not the same facts as those supporting the right which passed into the first judgment: thus in Brunsden v. Humphrey (1884) 14 QBD 141 where the same act of negligence caused damage to the plaintiff's property and injury to the plaintiff's person it was held that different rights were infringed and that an action for damages for personal injury was not barred by recovery of a judgment for damage to property.

If cause of action is taken to mean the facts which support a right to judgment, the rule of res judicata bars an action for relief founded upon the same facts as those upon which an earlier judgment was recovered, though the right sued upon in the second action is different from the right which passed into or was negated by the earlier judgment. Thus in Lemm v. Mitchell [1912] AC 400 a plaintiff in Hong Kong who failed in an action for criminal conversation [sic] because that right of action had been abolished by Ordinance could not sue when that right of action was retrospectively revived by a subsequent Ordinance.

When the same facts support rights to different remedies against the same defendant, the plaintiff cannot recover a judgment giving a remedy in respect of more than one right. He may pursue his remedies concurrently in the same action, but he is put to his election before judgment as to which remedy he shall have. And when judgment is entered, all of the rights which he might have claimed in that litigation are merged in the judgment. Lord Atkin in United Australia Ltd. v. Barclays Bank Ltd. [1941] AC, at p 30 defined the effect of a judgment upon alternative remedies:

'Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other: but he can take judgment only for the one, and his cause of action on both will then be merged in the one.'

The party entitled to relief cannot improve his position by bringing separate actions. Though he may elect between inconsistent remedies pursued in the one action, or between the actions to be pursued in order to recover a judgment giving the remedy he chooses, the merger in the judgment first recovered of a right to another remedy takes effect by operation of law. When those rights (or causes of action) are extinguished, no further litigation may be pursued to recover a second judgment upon them.

Accordingly, inconsistency between judgments against the same defendant is avoided by the merger in the judgment first recovered of the right to the remedy thereby given and of all other rights which arise on the same facts." ( Anshun , per Brennan J at 608-612.) 44 In the instant proceedings, the cause of action is different, the fundamental facts pleaded are different and the rights asserted are different. There is no bar to the proceedings before the Tribunal continuing because of the operation of res judicata (or cause of action estoppel), issue estoppel or merger of the right in the judgment of the District Court. 45 Further, the nature of the claims made before the Tribunal, if they were to have been made before the District Court (say in the continuation and determination of the cross-claim), could have been dealt with and judgment entered for Mr and Mrs Moss, notwithstanding that judgment had already been entered on the statement of claim. There is no inconsistency in the allegation of the defects and the agitation of the rights of Mr and Mrs Moss under its insurance claim, and the determination that Stage 3 of the contract had not been reached. Anshun Estoppel 46 The major thrust of the submission by Vero before the Court was that Mr and Mrs Moss were precluded from proceeding with their claim before the Tribunal because of the operation of Anshun estoppel. In Anshun, the joint judgment (Gibbs CJ, Mason and Aickin JJ) dealt with the possibility that the defence in those proceedings could have claimed contribution and/or indemnity. Having determined that the earlier proceedings did not, by virtue of res judicata or issue estoppel, preclude later proceedings, the joint judgment said: "Had the Authority pleaded the indemnity as a defence to Anshun's claim for contribution, a decision on that defence would have been a necessary step to the ultimate decision that Anshun was entitled to contribution. The defence of indemnity not having been raised, the judgment for Anshun did not involve a determination of that issue.

The critical issue, then, is whether the case falls within the extended principle expressed by Sir James Wigram V.C. 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.'

The existence of the principle has been affirmed by the Judicial Committee on four occasions ( Hoysted v. Federal Commissioner of Taxation [1925] HCA 51; (1925) 37 CLR 290, at p 303; [1926] AC 155, at p 170; Kok Hoong v. Leong Cheong Kweng Mines Ltd. [1964] AC 993, at pp 1010-1011; Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. [1975] AC 581; Brisbane City Council v. Attorney-General (Q.) [1979] AC 411, at p 425). See also Carl Zeiss [1967] 1 AC, at pp 915-916, 966). In two of these cases the principle was applied so as to shut out litigation of an issue which could and should have been litigated in the earlier proceedings." ( Anshun , supra, at 598, per Gibbs CJ, Mason and Aickin JJ.) 47 Vero submits that the allegation of defective work (and the claim for damages arising therefrom) could and should have been litigated in the earlier proceedings in the District Court. However, such a claim would have been required to be litigated as a cross-claim and was not, except to the extent that it evidenced a failure to reach Stage 3 of the contract, a defence to the proceedings commenced by CHNR. 48 In its submissions, Vero rely upon the judgment of the Full Court of the Federal Court of Australia in Chamberlain v Deputy Commissioner of Taxation (1991) 28 FCR 21, as authority for the proposition that, where it was reasonable for a party to raise an issue in proceedings, the application of the doctrine of Anshun estoppel prevents them from raising the issue against the same parties in later proceedings. The judgment of the Full Court of the Federal Court has been the subject of some academic and other criticism. It is unnecessary to resolve the issues associated with the expression of the principle by the Full Court of the Federal Court. The proceedings before the Full Court of the Federal Court in Chamberlain are quite notorious. What seems to have been a mistake led the Deputy Commission of Taxation to obtain judgment against the taxpayer for 10% of the sum owed in tax. After judgment, without setting aside the earlier judgment and without seeking to rely upon mistake, the Deputy Commissioner of Taxation sued for the remainder. The High Court (Chamberlain v Deputy Federal Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502) held that it was barred from so doing: see joint judgment of Deane, Toohey and Gaudron JJ at 511. The joint judgment and the judgments of Brennan J and of Dawson J each note that the Commissioner chose not to impeach the first judgment, inter alia, for mistake. In a later action, the Commissioner sought to rely upon mistake and a Full Court of the Federal Court of Australia concluded that the Commissioner was, at that stage, not entitled so to do. 49 However, the particular facts of Chamberlain still depend upon the reasonableness and appropriateness of raising the issues in those proceedings. In Chamberlain, the allegation of mistake was a total answer to the issue estoppel/res judicata argument in the earlier proceedings, because it would, if successful, have had the effect of setting aside the judgment. 50 It is a far more controversial aspect to suggest that the failure to plead a cross-claim and have it determined, can give rise, in like manner, to some Anshun estoppel. 51 The matter of Anshun estoppel and its applicability to a cross-claim was discussed in O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 (per Kirby P at 613 and McHugh JA at 640) and on appeal in the High Court in Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332 at 346 and 355. 52 In the Court of Appeal, Kirby P expounded the principle of Anshun estoppel and said that it required a party to litigation to plead a cross or counter-claim which was so relevant to the subject matter of the litigation that it would have been unreasonable not to plead it. In his reasons, Mahoney JA said: "It is therefore necessary to determine when, if not pleaded by way of set-off or counter-claim, a right will be lost and when it will not. In Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581, Lord Kilbrandon said that it was 'an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings' (at 590). In Port of Melbourne Authority v Anshun Pty Ltd , their Honours said (at 602):

'… As we have seen, this statement is not supported by authority. And if we are to discard the traditional statement of principle because it was linked to the rules of common law pleading, there is no reason for rejecting the powerful arguments based on considerations of convenience and justice which were associated with it.'" ( O'Brien , supra, at 627.) 53 His Honour Justice McHugh held that the respondent was not estopped from lodging a proof of debt in the winding-up action and that the Arbitration (Foreign Awards and Agreements) Act 1974 did not empower the Court to stay the claim. In that regard, he agreed in part with Kirby P and in part with Mahoney JA. 54 On appeal to the High Court, the Court said: "A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings ( Duedu v. Yiboe [1961] 1 WLR 1040, at p 1046) cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v. Anshun Pty. Ltd. as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at pp 599-601. That is not the present case." ( Tanning Research Laboratories Inc v O'Brie n , supra, per Deane and Gaudron JJ at 346.) 55 The issue of the application of Anshun estoppel to cross-claims was later discussed by both the Full Court of the Federal Court of Australia and the New South Wales Court of Appeal: see Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287; Noel Ling v Commonwealth of Australia [1996] FCA 1646; (1996) 68 FCR 180; and Zavodnyik & Ors v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457. In Zavodnyik, Handley JA (with whom Mason P and Latham J agreed) cited the test in Ling with approval. He said: "In Ling v The Commonwealth (1996) 68 FCR 180 on the other hand the plaintiff's failure to plead his claim as a cross-claim in the earlier proceedings was held to have been reasonable and there was no Anshun estoppel. Wilcox J said (184):

'In considering reasonableness ... consideration must be given to all aspects of the case. They include the extent of the overlap between the facts underlying each claim; the greater the overlap, the easier it is to argue that it was unreasonable not to raise the matter in the first case. They also include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier ... In assessing the reasonableness of Mr Ling's failure to raise his claim against the Commonwealth when he was sued by it in the earlier action, it is necessary to look at the whole of the circumstances that he then confronted. His claim involved facts that overlapped the Commonwealth's case to some extent but were substantially extraneous to that case.'" 56 In each of the above judgments, the parties to the subsequent proceedings were the same as the parties to the previous relevant proceedings. Further, the "cross-claim" necessarily arose from the matters litigated in the earlier proceeding. In this case, the cross-claim, which, it is said, would be reasonable, would join to the proceedings another party not privy to the building contract that underpinned the originating cause of action. 57 It is unnecessary for me to resolve this issue. Ultimately, even if, at its highest, the Anshun principle were capable of being used to bar proceedings that could have been taken on cross-claim, the underlying pre-condition to such a bar is that the cross-claim must have been reasonably available. 58 On the facts found by the Tribunal, accepted by the parties, and confirmed by this Court, the contract for the building work was on foot and affirmed at the time that the cross-claim was withdrawn and at the time that judgment was entered by Twigg DCJ. In those circumstances, it was neither reasonable nor appropriate for the cross-claim, which was seeking damages for defective work for a contract that had not yet concluded, to be pursued. In Brewarrina Shire Council v Beckhaus Civil Pty Ltd & 1 Or [2005] NSWCA 248, the Court of Appeal (Ipp JA with whom Hodgson and McColl JJA agreed) said: "[53] The notice of contention raises the question whether the Contract was terminated by mutual agreement. The Council long denied this proposition but, on the third day of the appeal, assented to it. Despite the Council's late acceptance of the proposition, the question remains relevant as it exposes a misconception by both parties in the way the issues were addressed at trial. The misconception was that the Council could claim damages from Beckhaus for defective and incomplete work while the work was still in Beckhaus' possession and while Beckhaus was still obliged (and entitled) to execute the work to practical completion. This misconception permeated the conduct of the case by all involved and complicated the identification of the true issues in the case.

[65] No provision of the Contract prevented the Council from suing Beckhaus for damages for breach of contract under common law; but that is not to say that, simply by reason of a failure, by the date for practical completion, to complete the work to the standard required, the Council would be entitled to damages for defective or incomplete work.

[66] An important part of the Council's case at trial was that Beckhaus at no stage achieved practical completion of either Separable Portion A or B. Master Macready upheld this assertion and, for reasons that I later set out, I have come to the same conclusion.

[67] Accordingly, as at the judgment date, the Council rightly denied that practical completion had been achieved. But, it continued - at that stage - to hold Beckhaus to its contractual obligations to perform the work. Thus, on the Council's contention, at the date of judgment, the work remained in Beckhaus' possession; the Council, in effect, having refused to accept possession.

[68] While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus' failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus' possession. In other words, it was an inevitable incident of the Council's argument that the work had not been delivered to and accepted by the Council (Beckhaus - on the Council's argument - being in possession of and obliged to complete the work). While the work was in Beckhaus' possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council's possession, did not at that stage form part of its patrimony.

[69] This situation would have changed when the Contract was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work." 59 At the time of the proceedings before the District Court (at least at the times when the cross-claim was discontinued and judgment on the statement of claim was entered), the contract was on foot and CHNR could have rectified the defects. It was not reasonable or appropriate, nor permissible, in those circumstances, at that stage of the contract, for Mr and Mrs Moss to have had their claim for damages based upon defective work heard and determined by the District Court. 60 Whether or not Anshun principles bar proceedings where earlier proceedings could have reasonably been pursued by way of cross-claim, it does not bar the proceedings currently before the Tribunal. Conclusion 61 For the above reasons, Mr and Mrs Moss are entitled to pursue their proceedings before the Tribunal. The Tribunal was not in error and the summons shall be dismissed. 62 The Court makes the following orders:

(i) Judgment on the summons for the first and second defendants;

(iii) Plaintiff pay the costs of and incidental to the proceedings incurred by the first and second defendants, as agreed or assessed. The third defendant shall bear its own costs;

(iv) Liberty be granted for the parties to approach, within 7 days, for any special order as to costs or any consequential order arising from the reasons for judgment.

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