37 In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, Gibb CJ, Mason and Aickin JJ dealt with these two forms of estoppel as follows (at 597-598):
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 ([1967] 1 AC 853, at pp.913, 964 et seq.).
Subject to an examination of the application of the principle in Henderson v Henderson ((1843) 3 Hare 100 [67 ER 313]), it is evident from the discussion which has already taken place that this is not a case of res judicata. 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 s24(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 or 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) 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 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.