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 , 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."
11 Her Honour also concluded uncontroversially that s 459S of the Corporations Act precluded Satrak Pty Ltd from disputing the debt in the winding up proceedings. However, nothing precluded the company from disputing the debt or making an application to this Court to have the statutory demand set aside pursuant to s 459G of the Corporations Act. Her Honour also referred to s 459H of that Act.
12 In the circumstances her Honour concluded that the legislative position made it clear that if Satrak Pty Ltd had wished to set aside the statutory demand it must have made an application to do so within 21 days of service of the demand upon it. Her Honour reasoned that in order to set the demand aside it had to satisfy the court on the balance of probabilities that there was a genuine dispute between it and the defendant about the existence or the amount of the debt to which the demand relates or that it had an offsetting claim. In her Honour's words, Satrak Pty Ltd "did not get to first base" as it never made the application to have the statutory demand set aside within the specified time period. Accordingly her Honour reasoned that the company could not argue that it disputed the debt at the winding up hearing pursuant to s 459S of the Act. Having clearly had an opportunity to dispute the debt claimed by the defendant the company chose not to make an application to have the statutory demand set aside within the statutory time frame. Finally, her Honour reasoned that the plaintiff as the sole director of the company was the person in control of its day-to-day affairs and decisions and as such was the only person who could have taken steps to dispute the debt. Her Honour found that the plaintiff was arguably in the circumstances a privy of Satrak Pty Ltd.
13 I note that the plaintiff originally contended that the plaintiff was not a privy of Satrak Pty Ltd. That point was, however, abandoned by the plaintiff in the proceedings before me.
14 Her Honour's conclusion was finally stated at par [34] of her judgment in the following terms:
"Accordingly, I am satisfied on the balance of probabilities that [the plaintiff], as guarantor of the principal debtor, was in control of Satrak which was served with a statutory demand is now estopped from asserting that Satrak did not owe the debt to [the defendant] in these proceedings."
15 It is the plaintiff's contention that her Honour's conclusion is erroneous. The question that I am required to determine is whether or not that contention is correct.
16 The plaintiff submitted that the authorities upon which the defendant relied below and the additional authorities upon which it relies before me do not support her Honour's conclusion. I was referred by Mr Windsor of senior counsel who, with Mr Hutchings of counsel, appears for the defendant, to the decision of the Supreme Court of Western Australia in Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 and 420093BC Ltd v Bank of Montreal 128 DLR (4th) 488. In each of those cases a guarantor was held to have been estopped from re-litigating the issue of the indebtedness of a principal debtor. In each case the party in the equivalent position of the defendant was the beneficiary of a judgment against the principal debtor. The defendant says that distinction is of no significance. The plaintiff's submission before me is that that point of distinction is critical and underpins his contention that her Honour fell into error.
17 In further support of that contention, the plaintiff asserted that in the context of the particular creditor's statutory demand that was served on Satrak Pty Ltd, neither the service of that demand nor the company's failure to comply with any of its terms, including the decision not to apply to set it aside, gave rise to or resulted in any judicial determination whatsoever. In those circumstances, according to that submission, no issue estoppel could have arisen.
18 The plaintiff referred me to the decision of this Court in Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd [2004] NSWSC 877 at par [16] where Barrett J made the following remarks:
"[16] 16 The defendant says that the plaintiff should be required to pay into court, to abide the outcome of the appeal, the full sum of $158,051.21 to which the Master reduced the statutory demand. The plaintiff says that the defendant should not be given the form of priority or security that that would entail. I accept the plaintiff's submission. This is, after all, not a debt recovery action. A company on which a statutory demand is served is in no sense required to comply with it. It may, if it wishes, allow the statutory presumption of insolvency to arise (by not paying the demanded sum) and, if a winding up application follows, seek to show that it is in fact in a solvent state so that a winding up order is not justified. The statutory demand process is no more than a process that defines where the burden of proof lies in winding up proceedings."
19 The plaintiff also referred me to the decision of Austin J in JEM Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ACSR 393 at par [24] as follows;
"[24] The defendant has not yet taken any recovery action (although, presumably, its claim to be paid the $500,000 will be raised by way of cross-claim in proceedings recently commenced by the plaintiffs in the Technology and Construction List), choosing instead to issue and serve a statutory demand. It is important to remember, as Barrett J pointed out in the Australian Beverage Distributors case (at [16]), that there is an important distinction between a debt recovery action and the service of a statutory demand …"
20 Finally, the plaintiff referred me to Cornick Pty Ltd v Brains Master Corporation [1995] FCA 1710; (1995) 19 ACSR 20 at par [9]:
"[9] The statutory demand is not a proceeding in the Court. It is signed by the creditor. It is not filed in court. It is true that s459E(3)(b) of the Law provides that the accompanying affidavit must comply "with the rules". But that expression is defined by s9 of the Law to mean the Rules or "rules of the Supreme Court", as the case requires. Here the affidavit in support has obviously been drawn to comply with the Supreme Court Rules, 1970 (NSW). Had the affidavit verifying been made under r 36A of the Corporations Rules, it would have made no difference. That rule is made by virtue of s60(1)(b) of the Corporations Act 1989 because it is required by s459E(3) of the Law, not because it relates to "proceedings" in the Court. The heading to Form 93B and paragraph (2) of the "Important Note" set out in that form correctly show that no proceedings have been commenced."
21 From these authorities the plaintiff reasoned that the failure by Satrak Pty Ltd to resist the winding up application could not give rise to an issue estoppel. The learned Magistrate herself accepted that pursuant to s 459S of the Corporations Act a principal debtor was precluded from disputing the debt in the winding up proceedings in any event. The plaintiff reasoned that on this basis alone no issue estoppel could arise because there was no judicial determination directly involving any issue of fact or law disposed of in the winding up proceedings that was in any way directly relevant to the determination of the proceedings before her Honour. Rather, the relevant determination in the winding up proceedings was that Satrak Pty Ltd was insolvent and that in those circumstances it ought to be wound up. This led her Honour to conclude that the defendant was estopped from asserting that Satrak Pty Ltd did not owe a debt to the defendant in those proceedings as mentioned above.
22 Mr Windsor has quite properly conceded that his researches have failed to locate any decision which is directly comparable to the present case. He acknowledges as well that in point of principle there is a distinction between circumstances in which the party seeking to claim the benefit of the estoppel is a judgment creditor and circumstances where it is only a party that has managed successfully to obtain an order for the winding up of the principal debtor.
23 Is should not pass without comment in this respect that her Honour's judgment referred in terms to a recent decision of the New South Wales Court of Appeal in Canon Australia Pty Ltd v Patton [2007] NSWCA 246. In that case Basten JA made the following comments at par [8]:
"[8] Inconsistent judgments may result if separate proceedings were brought against the principal debtor and the guarantors. However, where the guarantors controlled the principal debtor company or where they had notice of the demand against the principal debtor, they may yet be estopped from denying the liability of the principal debtor, established by judgment in other proceedings : see Spencer Bower, Turner and Handley, The Doctrine of Res Judicata , (3rd ed by Handley, 1996) at [224] and see Pettman v Keble (1850) 137 ER 1067; Ben Shipping Co v An Bord Bainne [1986] 2 All ER 177, 187 (Bingham J); Gracechurch Holdings Pty Ltd v Breeze & Anor (1992) 7 WAR 518, 524 (Ipp J); State Bank of NSW v Stenhouse (1997) Aust Torts Rep ¶81-423 (Giles CJ, Com Div) and Interchase Corp Ltd (in liq) v FAI General Insurance Co Ltd [2000] 2 Qd 301 (Davies, McPherson JJA and Byrne J)." (Emphasis added).
24 It seems to me that the emphasised words in the preceding quote eloquently draw attention to the plaintiff's principal proposition before me. The nature of the estoppel upon which the defendant successfully relied in the court below arose out of circumstances significantly, or at least for present purposes substantially, different to those applying in favour of a judgment creditor.
25 The issue in the present proceedings is not a sterile one. The plaintiff contends that the state of the accounts between Satrak Pty Ltd and the defendant if properly analysed would reveal a level of indebtedness that was less than the judgment sum found by her Honour in the court below. The plaintiff's complaint before me is said to have substance because her Honour did not otherwise reason to a point or in a way that led to a finding that Satrak Pty Ltd was indebted to the defendant quite apart from her conclusions about issue estoppel. In that sense the plaintiff complains that her Honour's decision fails properly or adequately to give or to contain reasons about why or how it is that Satrak Pty Ltd was indebted to the defendant in any way at all.
26 In my opinion her Honour's conclusion that the plaintiff was estopped from denying the indebtedness of Satrak Pty Ltd to the defendant is wrong. In my view the principles so clearly expressed by Dixon J in Blair v Curran (supra) did not, and do not presently, apply. In defending his alleged obligations arising under the guarantee the plaintiff was entitled to the benefit of a reasoned determination by her Honour that dealt with the question of Satrak Pty Ltd's indebtedness to the defendant. So much was foreshadowed by the plaintiff in the proceedings before her Honour at an early stage when the plaintiff argued that the defendant's intention to raise the issue estoppel point should have been argued and determined as a preliminary matter. In the events that occurred her Honour declined that invitation and proceeded thereafter over several days to hear argument on substantive issues touching Satrak Pty Ltd's indebtedness to the defendant. Notwithstanding that fact, her Honour's decision does not in my opinion bear witness to the significant factual issues ventilated in the proceedings before her on that topic. Her Honour would appear, in my view erroneously, to have succumbed to the defendant's arguments on the issue estoppel point and correspondingly to have abdicated her responsibility to deal with Satrak Pty Ltd's substantive obligations in a proper way.
27 It follows in my view that the plaintiff is entitled to relief as the result of that error of law. It seems to me in the circumstances therefore that I should set aside her Honour's judgment and remit the matter to her for determination in accordance with my decision. I will hear the parties on the question of whether or not that remitter should be accompanied by specific directions as to the manner in which her Honour should determine the matter further.
28 I will hear the parties on the question of costs.