Landmark Building Developments Pty Limited v Toyama Pty Limited & Ors,... [2004] NSWSC 1103 | Case summary

JUDGMENT 1 These two cases have been heard together. They were fixed for hearing on 1 November but during the week before the hearing the parties agreed that the hearing could not proceed although it would be possible for certain issues to be determined now. In the result I made an order by consent for the separate determination of certain issues and the hearing proceeded only in relation to those issues. 2 I can summarise those issues briefly as being whether, by reference to a judgment of the Federal Court of Australia, an issue estoppel has arisen or whether it would be an abuse of process to now try to re-litigate the issues decided in that case. 3 The background facts are rather complex, but it is common ground that a joint venture agreement was formed to the general effect that two companies, Landmark Building Developments Pty Limited (which I will call "Landmark") and Toyama Pty Ltd (which I will call "Toyama") would purchase certain land at Port Stephens with a view to constructing upon that land a home unit complex and re-selling the land for a profit. However, there are disputes as to the identity of the joint venturers, as to the terms of the joint venture agreement and, in particular, as to whether there was some agreement made between the joint venturers on the one hand and Parramatta Design and Developments Pty Limited (which I will call "Parramatta") on the other hand to the general effect that Parramatta was to be retained not only as the designer of the proposed home unit complex but also as the builder of that complex. 4 I will start by identifying or describing the various parties. There are two shareholders in and directors of Landmark, namely, Mr Barrak, who is a solicitor, and Mr Fares, who has some qualifications as an architect, although it may be that those qualifications are not recognised in Australia. Mr Fares appears to be the sole shareholder in and director of Parramatta. Whatever might be the precise position about the qualifications of Mr Fares, Parramatta carries on the business of a building designer and it did work of this general nature in relation to the proposed building to be constructed on the Port Stephens land. Mr Barrak knew and was friendly with Mrs Haviland, another solicitor. She was formerly married to Mr Rix. Mrs Haviland and Mr Rix appear to be the shareholders in and the directors of Toyama. When it is not necessary to discriminate between Toyama, Mrs Haviland and Mr Rix I will refer to them collectively as the Toyama interests. Similarly, when it is not necessary to be more precise, I will refer indiscriminately to Landmark, Parramatta, Mr Barrak and Mr Fares as the Landmark interests and I will refer to Parramatta and Mr Fares indiscriminately as the Parramatta interests. 5 The joint venture agreement in question appears to have been formed, as between the natural persons concerned, between Mr Barrak, Mr Fares, Mrs Haviland and Mr Rix. Mr Barrak and Mr Fares acted through Landmark which was to hold a two thirds interest in the venture whilst Mrs Haviland and Mr Rix acted through Toyama, which was to take a one third interest in the venture. Later Landmark and Toyama became registered proprietors of the fee simple in the Port Stephens land as tenants in common in these proportions. On the case of the Toyama interests the joint venturers were Toyama and Landmark. On the case of the Landmark interests there were two additional venturers, namely, Mrs Haviland and Mr Rix, although it is not clear, on the evidence before me now, what role, if any, Mrs Haviland and Mr Rix were to play in the affairs of the joint venture. 6 Differences arose and Toyama brought a claim under 66G of the Conveyancing Act 1919. This resulted in the making of an order appointing trustees for the sale of the land and later in the land being sold by those trustees to Concrete Pty Limited (which I will call "Concrete"). It was a stranger to the parties to the joint venture agreement. After that sale the Parramatta interests asserted a claim to copyright in respect of certain plans and drawings. In short, these were the plans and drawings prepared by the Parramatta interests to support an application made by the joint venturers for a development consent in respect to the Port Stephens land, which application was successful. 7 On conventional principles, the Parramatta interests, being in the position of architect, had copyright in respect of those plans and drawings but had given an implied licence to their clients, the joint venturers, to use those plans and drawings, at least to the extent appropriate in relation to the construction of the home unit complex referred to in the plans and drawings, and to the extent of constructing the home unit complex in accordance with the development consent obtained using those plans and drawings. Again on conventional principles, that implied licence passed to Concrete as the successor in title to the land in question. The relevant principles and authorities are discussed in detail in the reasons for judgment of Conti J, to which I will refer in a moment, and they are not in issue on the present hearing. 8 There is an issue, perhaps yet to be resolved, as to whether it was Parramatta that had the copyright in question or Mr Fares. Both he and Parramatta say that Parramatta had the copyright and I will proceed on this basis. 9 Concrete sued the Parramatta interests in the Federal Court saying that those respondents had made inappropriate threats asserting copyright in the plans and drawings, whilst Concrete said that it had an implied licence to use them for the purpose of construction of the home unit complex on the Port Stephens land pursuant to the development consent. 10 That case came to be heard by Conti J, who gave judgment on 13 October last in favour of Concrete (see Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2004] FCA 1312). It is this judgment that is central to the separate questions to be determined now, namely, whether an issue estoppel arises from that judgment or whether it would be an abuse of process for the Landmark interests to now seek to contradict that judgment. 11 In proceedings number 50099 of 2003, where Landmark is the plaintiff and the Toyama interests are the defendants, Landmark sues for damages for breach of contract. It says, in short, that the Toyama interests breached the contractual arrangement by terminating the joint venture and compelling the land to be sold before the building work had been carried out, and it says that, whilst this resulted in some profit to it, it was a much smaller profit than would have been made if the building work had been carried out before selling the land. 12 In the course of making that claim it said in section B of the summons that an issue likely to arise was whether there was a term of the joint venture agreement that the building work was to be carried out by Parramatta. 13 In proceedings number 50172 of 2003 Parramatta sues Landmark and the Toyama interests. This case was originally brought in the District Court, but later removed into this Court. Parramatta sues the various defendants on the basis that collectively they were the joint venturers. Parramatta pleads that it entered into a contract with the joint venturers to the effect that Parramatta was to provide to them various services said to have been non-severable and cumulative, including the design of the building, the provision of certain services relating to the necessary development consent, and carrying out the building work itself, and it says that its promised reward was to be a percentage of the construction costs. 14 One of the curiosities of the litigation is that Landmark has not filed a defence to this claim. Whilst it is reasonably clear that Mr Barrak and Mr Fares have now reached some measure of agreement between themselves, including for that purpose Landmark and Parramatta, there is, on the face of the record, some dispute between these two companies, or, at least, some unresolved claim by Parramatta against Landmark. 15 As a matter of history, proceeding number 50172 was commenced in the District Court on 23 July 2003, proceeding number 50099 was commenced on 24 July 2003 and the Federal Court proceeding on 7 October 2003. It seems that because of the urgency attached to the resolution of the copyright question the Federal Court case was given some degree of expedition. At any rate it came to judgment first. 16 In each of the two cases now before me the allegations made that are critical for present purposes are that Parramatta was to be not just the designer of the proposed building, but also the builder, and that Parramatta was to be paid a percentage of the construction costs as its fee. 17 The Toyama interests deny each of these allegations saying, in substance, that the only immediately relevant agreement was the joint venture agreement to which only Landmark and Toyama were parties, and that the terms of the joint venture agreement were that the joint venturers were to call for tenders from prospective builders. They say that Parramatta was to be paid a fee for the work it did in relation to design and services connected to the obtaining of the development consent, but the fee was not to be calculated by reference to the construction costs. 18 The case in the Federal Court proceeded by way of pleadings. In par 4 of its statement of claim Concrete pleaded that Parramatta was engaged by Landmark and Toyama to prepare the relevant plans and drawings, and by par 4 of its defence Parramatta admitted that allegation. It did not mention either Mrs Haviland or Mr Rix in its defence, although par 16 and succeeding paragraphs pleaded that if Landmark and Toyama had formerly had an implied licence in relation to the copyright in respect of the plans and drawings, that implied licence had not passed to Concrete. The basis of this allegation was made clear in the cross-claim brought by Parramatta against Concrete, in substance, claiming copyright in respect of the plans and drawings. Parramatta said in its cross-claim that it had prepared the relevant plans and drawings pursuant to the terms of a conditional contract, which included a condition providing for the payment to Parramatta of a reward, and that since the reward had not been paid to Parramatta there was no implied licence for anyone to use the plans and drawings. It went on to describe the terms of the contract in language that substantially mirrored its pleadings in proceeding number 50172 that I summarised earlier. The pleading referred to agreement between Parramatta and the joint venturers without identifying who they were except to speak of Landmark and "other joint venture partners", but it seems implicit in the pleadings that Parramatta's case was based upon some contract formed between itself, on the one hand, and the joint venturers on the other hand, necessarily after the formation of a joint venture agreement. 19 Conti J rejected Parramatta's defence to Concrete's claim and dismissed Parramatta's cross-claim. In particular, he rejected the contention that Parramatta had been retained by the joint venturers to construct the proposed building, as distinct from being retained to design it, and in coming to this conclusion he dealt with a number of incidental matters, including Parramatta's claim as to the basis upon which it was to be remunerated. 20 The Toyama interests now say that an issue estoppel has arisen from this judgment. The position here is most easily seen in relation to Parramatta, which was a party to the Federal Court litigation, which actually appeared and fought the case and lost it. However, the Toyama interests say that there is also an issue estoppel that arises as against Landmark because, whatever Concrete's interest was in the copyright, Concrete acquired that interest as a privy of both Landmark and Toyama, they being the predecessors in title to Concrete in respect of the Port Stephens land and, therefore, of the implied copyright licence. 21 The last mentioned submission raises a question that does not appear to have been the subject of any earlier decision precisely on the point. For the purpose of the law about issue estoppel, if A is the successor in title to B, A has sometimes been said to be B's privy, but these cases raise what might be said to be the reverse position, and the question raised might be said to be whether B, as the predecessor in title to A, is A's privy. I am inclined to think that it is more appropriate to ask whether A and B are privies to each other, or whether there is a relationship of privity between them, rather than to ask whether one is the privy of the other, or that it is appropriate to analyse the nature of the relationship between them without attaching too much weight to such a label as calling one of them a privy of the other (see Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 at 461-463; Bigelow v Old Dominion Copper Mining and Smelting Co (1912) 225 US 111 at 128-129 and Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 108 ALR 335 at 342-346, on appeal (1993) 46 FCR 510. I need not decide this question because an issue estoppel can only arise when there is mutuality between the party asserting an issue estoppel and the party against whom the estoppel is asserted (Ramsay v Pigram (1968) 118 CLR 271 and Gleeson v J Whipple & Co Ltd [1977] 1 WLR 510 at 515-516). 22 Parramatta is presently bound by an issue estoppel as against Concrete and it may be that if there is a relationship of privity between Concrete and Landmark and Toyama there is also an issue estoppel in favour of Toyama against Parramatta, but it cannot be said that Mrs Havliand or Mr Rix were in a relationship of privity with Concrete. 23 If one consider what the position would have been if the judgment of the Federal Court had gone the other way, or what the position might be if the present judgment of the Federal Court is set aside on appeal, neither Mrs Haviland nor Mr Rix would have been bound by the supposed judgment or will be bound by the supposed judgment on appeal. That is, there is no mutuality so far as they are concerned. Whilst it might be that there is an issue estoppel in favour of Toyama alone, as a practical matter it does not appear to be of any real advantage to any party in resolving Parramatta's case against Toyama alone at this stage on the basis of an issue estoppel. 24 As between Landmark and Toyama the position so far as concerns the supposed issue estoppel is different. Assuming for the moment that both these companies, opponents now, are in a relationship of privity with Concrete, the question raised is whether an issue estoppel arises as between these two companies, assuming them both to be in a relationship of privity with Concrete, their successor in title to the Port Stephens land, and, it may be assumed for the moment, the licence in the copyright. Neither Landmark nor Toyama was a party to the Federal Court proceedings. 25 This is another question apparently not the subject of any previous reported decision. I doubt that it can be said that an issue estoppel arises as between Landmark and Toyama but even if one did, no issue estoppel arises so far as concerns Mrs Haviland and Mr Rix, and the same practical considerations apply as in the proceedings brought by Parramatta. 26 I turn to the question raised about abuse of process and to deal first with the position of Landmark in proceeding number 50172 brought by Parramatta. 27 In this case Landmark is the first defendant. It has not filed a defence and it is not a respondent or otherwise a party to the application made by its co-defendants, the Toyama interests, for a stay of proceedings against them on the grounds of abuse of process. Landmark generally supported the position of Parramatta in this case and it resisted the application made by the Toyama interests in proceeding number 50099. The various procedural twists and turns left its lawyers in a particularly awkward position, they sometimes appearing for and sometimes against Parramatta, but nothing significant turns on that now. 28 It seems appropriate to simply ignore Landmark's position in case number 50172. If the other defendants succeed the likelihood is that some agreement already made between Landmark and Parramatta, the terms of which have not been communicated to me, will mean that Parramatta will not press its claim against Landmark, although it will be free to do so whatever the result of the present debate. 29 Dealing then with Parramatta's claim against the Toyama interests, Parramatta was a party to the Federal Court proceedings. It appeared, it defended the claim that Concrete brought against it, and it prosecuted its cross-claim against Concrete, and it failed. What it is now seeking to do, practically speaking, is to obtain a judgment of this Court that will contradict the judgment of the Federal Court. It has filed a notice of appeal from that judgment, but unless and until that judgment is set aside on appeal or otherwise, the position is that that judgment ought to be regarded as correct and binding. I do not see any point of distinction in principle between this case and such cases as Reichel v Magrath (1889) 14 App Cas 665 and North West Water Ltd v Binnie & Partners [1990] 3 All ER 547 (see also Secretary of State for Trade and Industry v Bairstow [2004] Ch 1). There are, of course, separate courts involved but that is not a satisfactory criterion for drawing a distinction, and nothing significant appears to turn upon the sequence in which the various proceedings were commenced or proceeded to judgment. The critical point here is that the Landmark interests are seeking to re-litigate issues that have already been litigated and are otherwise the subject of an existing judgment. 30 The position in proceeding 50099, in which Landmark is the plaintiff, is not as obvious in that Landmark was not a party to the Federal Court case. However, Landmark's only shareholders and only directors, Mr Barrak and Mr Fares, were called as witnesses for Parramatta and it is clear that they were in a position to assist Parramatta in that case and that they did assist Parramatta in that case. The issues that Parramatta raised then, largely through their evidence, are the issues that Landmark wishes to raise now. In addition, for what it is worth, if anything, Landmark is represented now by the lawyers who represented Parramatta then. 31 It is true that the Landmark interests have, since the delivery of the Federal Court judgment, filed some further affidavits but it is not suggested that any of the evidence propounded in these affidavits, was not available to Parramatta for use in the Federal Court proceedings and in the main it appears to be of peripheral significance, mostly directed perhaps to preventing the repetition of submissions made in the Federal Court based upon the decision in Jones v Dunkel (1959) 101 CLR 298. 32 In substance, Landmark and Parramatta have presented a united front for a long time now, that is, a front united against those whom they evidently perceive to be their opponents, namely, Concrete and the Toyama interests. Remembering that the rules about issue estoppel and the rules about abuse of process are separate bodies of law, it does not seem inappropriate to note now, for the purpose of a consideration of the question raised about abuse of process, that Concrete is in a relation of privity with Landmark and Toyama according to the rules about issue estoppel. Concrete has succeeded in the litigation brought against it by Parramatta and in relation to Parramatta's cross-claim against Concrete, and what Landmark is now doing is to attempt to obtain a judgment which will contradict the Federal Court judgment. This circumstance seems to me to reinforce the view that would otherwise have arisen concerning Landmark's position in relation to the abuse of process question. 33 I conclude that it would be an abuse of process for Landmark to proceed with its claim against the Toyama interests asserting, in particular, that there was a contract between Parramatta and the joint venturers containing terms that Parramatta was to be the builder of the proposed building and that it was to be paid a fee calculated as a percentage of the construction costs. A finding to that effect contradicting the finding of the Federal Court would amount, in the language of Lord Halisbury LC in Reichel v Magrath to a scandal to the administration of justice. In more modern language one must recognise the public interest in not having re-litigated matters previously decided. In Ladkarn Holdings Ltd v Summit Property Developments Ltd (1991) 32 Con LR 66, a case where the facts are somewhat similar to the facts here, Judge Fox-Andrews QC said that it would offend common sense and justice to allow the dispute in question there to be re-litigated. 34 It appears to be true, as Landmark submits, that it had no formal notice given to it that it had to put forward its case in the Federal Court, but, as a practical matter, its only shareholders and directors, Messrs Barrak and Fares, gave evidence on behalf of Parramatta in that case, and there is nothing in the evidence that would justify a finding that there was any matter that Landmark might have wished to put forward in the Federal Court case that was not, in fact, put forward by Parramatta. I have referred already to the additional affidavits filed recently. They do not appear to help Landmark on this point. 35 I was led to understand that there was about to be some application for Mareva type relief, so that it seemed important to deliver these reasons for judgment as soon as could be arranged. I have, therefore, not dealt with all of the arguments recorded in the transcript and in the written submissions, advanced by the Toyama interests as to why they would succeed otherwise. It has seemed to me that I need not come to a final view about the difficult issue estoppel questions, because the practical result is that there will be a permanent stay of the two proceedings now before me, subject to a qualification I will mention, and it is better to bring the matters to finality now rather than to delay them any further. 36 I have borne in mind the need for caution in staying proceedings as an abuse of process, discussed in cases such as North West Water Ltd v Binnie and State Bank of New South Wales Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Reports 81-423 at 64,086 and following, where the Australian authorities are reviewed. However, when the adjectival facts are stripped away, this case seems to me to be a case where there clearly ought to be a stay of proceedings to prevent abuse of process. 37 In proceeding 50099 of 2003 on the application of the defendant I stay the proceedings permanently but grant leave to the plaintiff to apply to vary this order if the decision of the Federal Court of Australia in Concrete Pty Limited v Parramatta Design and Developments Pty Limited (2004) FCA 1312 is set aside. I order the plaintiffs to pay the costs of the defendants of the separate hearing. 38 In proceeding 50172 of 2003 on the application of the second, third and fourth defendants I stay the proceedings permanently as against those defendants but grant leave to the plaintiff to apply to vary this order if the decision of the Federal Court of Australia in Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2004] FCA 1312 is set aside. I order the plaintiff to pay the costs of the second, third and fourth defendants of the separate hearing. I make no order concerning the first defendant. 39 The exhibits should be returned forthwith. 40 In matter number 50099 of 2003, I discharge the order made on 14 October 2003 entered on 29 October 2003, the present order to take effect at 4 p.m. on Monday next, 15 November 2004. I grant liberty to any party to apply in the meantime in relation to that question on 24 hours notice.

Landmark Building Developments Pty Limited v Toyama Pty Limited & Ors, Parramatta Design and Developments Pty Limited v Landmark Building Developments Pty Limited and Ors

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