United Petroleum Pty Ltd v Whitehorn Estates Pty Ltd

Supreme Court of NSW|2023-11-28|Before: Garling J

JUDGMENT

By a Notice of Motion filed on 19 September 2023, the third defendant, Coastal Service Centres Pty Ltd ("Coastal") seeks orders against the plaintiff, United Petroleum Pty Ltd ("United") for the summary dismissal of United's claim against it, together with consequential relief.
In summary, the basis for that Motion was that the claim made by United against Coastal in the present proceedings amounts to an abuse of process because of either a cause of action estoppel or, alternatively, an estoppel in accordance with the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 ("Anshun").
For the reasons which follow, Coastal's Notice of Motion should be dismissed with costs.

Equity Proceedings

In late 2019, Coastal commenced proceedings against United in the Local Court of NSW claiming a little over $60,000 by way unpaid rental. The proceedings were transferred to the Equity Division of this Court on or about 27 November 2019.
On 15 January 2020, United filed a Cross-Claim in the proceedings. That Cross‑Claim sought the following relief: "A declaration that pursuant to the Lease dated 7 November 2018 between Whitehorn Estates Pty Ltd and the cross-claimant (Lease) which binds the cross-defendant as lessor and the cross-claimant as lessee, the rent payable under the lease for the period January 2019 to date, adjusted pursuant to clause 8.2.2 of the lease, was and is $236,500 (inclusive of GST) per annum (or such other amount as the court may determine)."
Costs and consequential orders were sought.
The Cross-Claim was later amended.
The Amended Cross-Claim pleaded the existence of the Lease to which previous reference has been made. It pleaded specific terms of the Lease dealing with the obligation of United to pay rent and outgoings and, in the event that the property or Building of which part is damaged (including destroyed), that it was not liable to pay rent if the property is unusable or else was entitled to pay reduced rent if the property is usable but diminished in its use.
The Amended Cross-Claim draws attention to cl 8.2 of Annexure B to the Lease, which is in the following form: "What happens if the property is damaged? 8.2 If the property or the building of which it is part is damaged (a term which includes destroyed): 8.2.1 the tenant is not liable to pay rent or any amount payable to the landlord in respect of outgoings and other charges that is attributable to any period during which the property cannot be used under this lease or is inaccessible due to that damage; 8.2.2 the property is still usable under this lease but its usability is diminished due to the damage, the tenant's liability for rent and any amount in respect of outgoings attributable to any period during which usability is reduced in proportion to the reduction in usability caused by the damage;"
Sub-clauses 8.2.3 and 8.2.4 make provision for the termination of the Lease either by the landlord or by the tenant after certain steps have been taken.
The Amended Cross-Claim pleaded the facts surrounding the fire to the Building and the adverse effect upon the various tenancies of other parties which were also located in the Building.
Paragraph 12 of the Amended Cross-Claim pleaded that as a result of the fire and associated matters: "… the usability of the leased premises has diminished significantly". It then pleaded this: "13. Since the resumption of trading to the present date ('relevant period'), the rent which the cross-claimant has been liable to pay to the cross‑defendant under the lease is the Previous Rent adjusted pursuant to clause 8.2 of the lease ('adjusted rent'). 14. In the events that have happened, the adjusted rent under the lease for the relevant period is $236,500 (inclusive of GST pa) or such other amount as the court may determine."
On 6 November 2020, Coastal filed an Amended Defence to that Amended Statement of Cross-Claim. In respect of the allegations set out in paragraphs 12, 13 and 14 of the Amended Cross-Claim, Coastal denied those allegations.
It appears that the Equity proceedings were listed for hearing in the Equity Division on 31 January 2022 and 1 February 2022.
On 27 January 2022, in advance of the hearing date, by consent, Darke J made orders which are set out in a Judgment Order issued by the Court on 23 February 2022.
That document contains the following: "The Court: 1. Makes orders in accordance with the Consent Orders - Rent Claim document initialled by Darke J, dated today's date and placed with the papers; 2. Vacates the hearing dates before Darke J commencing on 31 January 2022; 3. Reserve the question of costs occasioned by the vacation of the hearing date; 4. Stands the matter over for directions before Darke J on 31 January 2022. Consent Orders - Rent Claim: Statement of Claim 1. The Court declares that the rent payable pursuant to the lease dated 7 November 2018 between Whitehorn Estates Pty Ltd (ACN 605 915 786) and the defendant (Lease), being the lease that now binds the plaintiff as lessor and the defendant as the lessee, is adjusted pursuant to clause 8.2 of the Lease to reflect the following liability of the defendant to pay rent at: (a) $373,171.68 per year (plus GST) from 21 December 2018 to 30 June 2019; (b) $384,366.82 per year (plus GST) from 1 July 2019 to 30 June 2020; (c) $395,897.84 per year (0lus GST) from 1 July 2020 to 30 June 2021; and (d) $407,774.78 per year (plus GST) from 1 July 2021 to 30 June 2022 (Abated Rent). 2. The defendant pay to the plaintiff, within 14 days of the date of these orders, any difference between the rent paid to date by the defendant and the Abated Rent payable under the Lease for the period from 20 June 2019 to the date on which payment is made (Shortfall Amount). 3. No interest is payable on the Shortfall Amount. 4. The Court declares that the outgoings payable pursuant to the Lease be adjusted downwards by 21% pursuant to clause 8.2 of the Lease and paid by the defendant at that reduced amount from the date of the parties agreeing these orders. 5. Judgment for the defendant on the plaintiff's Amended Statement of Claim filed on 11 September 2020 (ASOC). 6. No order as to cost (with the intent and effect that the parties bear their own costs of the plaintiff's ASOC). First Cross-Claim 7. The defendant's Cross-Claim filed on 29 October 2020 (First Cross-Claim) be otherwise dismissed. 8. No order as to costs (with the intent and effect that the parties bear their own costs of the defendant's First Cross-Claim)."
The orders made by Darke J on 27 January 2022 did not finalise the entirety of the proceedings. There was on foot a Second Cross-Claim made by United against Coastal which remained listed for a final hearing commencing on 31 January 2022. There were two issues to be determined under that Second Cross‑Claim. The first group of issues related to a Notice dated 25 March 2021, by which United purported to exercise an option to renew the Lease for a period of five years from 1 July 2021 to 30 June 2026, pursuant to cl 4.2 of the Lease. The second group of issues concerned the giving by Coastal of a Notice of Consideration, with respect to its intention to repair the damage or reconstruct the Building.
The Second Cross-Claim did not proceed to a hearing in January 2022, but was ultimately heard by Peden J in the period in late July 2023. On 23 August 2023, her Honour, for the reasons which she gave, made an order under s 133F of the Conveyancing Act 1919 (NSW) that United be relieved against the effect of any breaches of the Lease that her Honour found, and that it was entitled to a declaration that it had renewed the Lease for a period of five years commencing 1 July 2021. Her Honour otherwise dismissed FASOC and made an order for costs: see Coastal Services Centres Pty Ltd v United Petroleum Pty Ltd [2023] NSWSC 1010.
On 25 August 2023, United filed a Notice of Intention to Appeal. The evidence does not reveal whether a Notice of Appeal or a Notice seeking Leave to Appeal has been filed.
Insofar as it may be relevant, I note that the Amended Statement of Cross‑Claim and Defence, the judgment and orders entered by Darke J, and the Second Cross-Claim, including the judgment and reasons of Peden J delivered on 23 August 2023, do not mention or call attention to the existence of, or any issues arising in, the Common Law proceedings.
Additionally, in articulating the arguments on this Notice of Motion, Coastal do not draw attention to or rely upon any specific findings of fact contained in the judgment of Peden J in the Equity proceedings, as being a foundation for either form of estoppel which it advances as the basis for the orders on this Motion.

Submissions of Coastal

Coastal submits that it is appropriate to commence a consideration of the issues raised by the Notice of Motion by looking to the substance of the Common Law proceedings and the Equity proceedings as distinct from their form: Clayton v Bant (2020) 272 CLR 1; [2020] HCA 44 at [34].
Coastal submits that the two claims brought in the Equity and Common Law Divisions concern the same contract, being the Lease, the same fire and "… the same alleged loss and damage". Coastal submits that in both cases, United "seeks compensation from Coastal because it has been forced to operate from a demountable building, leading to a loss of profits". Coastal submitted that the factual basis of the two claims, Common Law and Equity, entirely overlapped.
This submission was maintained in oral submissions where counsel submitted that it was appropriate to characterise the Common Law proceedings as: "… a claim for compensation in respect of loss and damage in the form of being forced to operate from a temporary premises due to the fire."
Counsel accepted that the characterisation of the proceedings in the Equity Division as "being proceedings in substance for compensation for loss and damage being suffered operating from the demountable premises" is a necessary and appropriate characterisation of those proceedings.
Coastal accepted that the compensation sought in each of the proceedings was to be calculated differently.
Coastal submitted that by reason of the termination of the Equity proceedings, in accordance with the judgment and orders made by Darke J on 27 January 2022, a cause of action estoppel had arisen.
Insofar as Coastal sought to rely upon an Anshun estoppel, it submitted that, having regard to the subject matter of United's Amended Cross-Claim in the Equity proceedings, it would be expected that United would have raised the Common Law claim against Coastal in those proceedings at that time to enable the issues to be determined in the one proceeding. Coastal submitted that United's failure to do so was unreasonable.
In support of this submission, Coastal relied upon the fact, as previously noted, that there was a complete overlap of the factual circumstances underlying both claims and that the breach alleged by United in the Common Law proceedings, being the failure to repair the building and premises after the fire, was a necessary pre-condition to its claim for a reduction in rent due to the reduced usability of the leased premises in the Equity proceedings.
Coastal pointed to the fact that the Amended Cross-Claim in the Equity proceedings, and the claim in the Common Law proceedings, raised issues that were intimately connected and, accordingly, it was appropriate for United to litigate the claims in the same proceedings to minimise costs and avoid the possibility of inconsistent judgments.
Finally, Coastal noted that United had provided no explanation as to why the claims, the subject of the Common Law proceedings, had not been brought in the Equity proceedings.

Submissions of United Petroleum

United drew attention, first, to the principles applicable to a summary judgment application. United submitted that before a Court would give summary judgment, it was necessary for the Court to reach a high level of satisfaction that the order should be made, and the power to order summary judgment should be sparingly employed. United drew attention to the observations of the plurality of the High Court of Australia in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 where the following observation was made: "57. Ordinarily a party is not to be denied the opportunity to place his or her case before the Court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
Secondly, United draws attention to the fact that the only provision in the Uniform Civil Procedure Rules 2005 ("UCPR") available to Coastal is that contained in r 13.4(1)(c), namely that the proceedings are an abuse of process of the Court for the purposes of its summary judgment application.
United submits that the proceedings have not been commenced for an illegitimate purpose and are not unduly oppressive to Coastal and that it is simply not tenable to contend that the claim against Coastal brings the administration of justice into disrepute.
United go on to submit that the specific breaches of contract and consequential damages claims alleged in the Common Law proceedings are not the same or equivalent to the claim made in the Equity proceedings which was for a reduction in rent pursuant to a mechanism contained in the Lease in cl 8.2.2. It submits that the Common Law claim in these proceedings is for damages for breach of contract and loss of profits, whereas the Amended Cross-Claim in the Equity proceedings was based solely on the concept of reduction in usability leading to a reduction in the rent capable of being charged by the Lessor and which was obliged to be paid by the Lessee.
In particular, United submitted that one could not characterise the Equity proceedings as being for damages for breach of contract, nor for compensation arising from the destruction of the Building. Rather, the Equity proceedings were solely dealing with a limited part of the Lease dealing with a rental reduction.
Insofar as it was intended by Coastal that United's conduct was unreasonable, United submitted that the Common Law proceedings against Coastal sit naturally with the damages claim based on the same Lease clauses brought by United against the Council, and that it was a reasonable forensic decision to plead that cause of action for damages for breach of contract in the Common Law proceedings.

Discernment

Counsel for Coastal accepted, having regard to the Grant Thornton report served in the Common Law proceedings, and having regard to the judgment and orders in the Equity proceedings of 27 January 2022, that there was no risk of inconsistent judgments being pronounced in either of the Equity proceedings and the Common Law proceedings.
That concession was, in my view, properly made. It is apparent that the substance of the Common Law claim for damages derives from the reduction in income of United which related to the reduction in the volume of fuel sold from the site prior to the fire which, United asserts, would have been expected to have continued, if not increased. The damages claimed are calculated by reference to the difference in income earnt between that projected fuel volume figure and the actual fuel volume sold.
It is helpful to consider the nature of the estoppels relied upon by Coastal. Cause of action estoppel was described in this way by the plurality (French CJ, Bell, Gageler and Keane JJ) in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28: "22. Estoppel in that form operates to preclude assertion in a subsequent proceeding of a claim to a right or obligation which was asserted in the [first] proceeding and which was determined by the judgment."
In describing Anshun estoppel, their Honours said at [22]: "That third form of estoppel is an extension of the first and of the second. Estoppel in that extended form operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding."
As their Honours went on to explain: "24. … It is appropriate also to explain the relationship between the doctrine of estoppel and the doctrine of the abuse of process as it has since come to be recognised and applied in Australia. The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding. 25. Abuse of process, which may be invoked in areas in which estoppel is also applied, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice against a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel. 26. Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel."
There is no doubt that the Equity proceedings and the Common Law proceedings both relate to the consequences of a fire which destroyed the Building, which was part of the property, the subject of the Lease between Coastal and United. It is also clear that there was a single Lease document which contained the legal rights and obligations of each of Coastal and United. However, as the High Court said in Clayton at [35]: "35. The common law of Australian does not treat rights precluded from assertion in subsequent proceedings as coterminous with the 'transaction' which earlier proceedings concerned."
The High Court said that the transactional approach which seeks to reframe the question from "what are the rights" to "what is the transaction", could not be adopted in Australia. At [36] of Clayton, the plurality said: "36. The transactional approach should not be adopted in Australia. It would blur the carefully hewn distinction between claim estoppel and Anshun estoppel. It would diminish the significance of the unreasonable element of Anshun estoppel. Our approach demands a more granular analysis."
As this is an interlocutory proceeding for summary judgment, and as the defence in the Common Law proceedings pleads as a substantive integer the existence of both cause of action estoppel and Anshun estoppel, it would be inappropriate for me to determine whether or not such estoppel arises unless I was satisfied to the high degree necessary on the basis of the material before me and the submissions made, that there was no real question or issue between the parties.
In my view, it is reasonably arguable that no cause of action estoppel arises. That is because it is not pellucidly clear, or else beyond reasonable argument, that the proper characterisation of the Equity proceedings is, as submitted by Coastal, to be compensation for loss and damage arising from the fire and the subsequent need to operate from demountable premises.
Rather there is, in my view, an argument of substance that would require that the Equity proceedings were intended to, and did, deal only with one aspect of the legal relationship between the parties covered by the Lease, namely the right of United to have the rental reduced by reason of the diminished usability of the property. It is plain from the pleadings in the Equity proceedings that such a question turned on the proper meaning of, and the rights created by, cl 8.2 of the Lease.
It is reasonably arguable that those rights are entirely distinct from the claim for damages brought in the Common Law proceedings by reference to the breaches of specific obligations in the Lease to repair the damage, or restore the property destroyed by the fire and continue, after restoration, the provision of services by Coastal to United. Putting it differently, the Common Law proceedings do not seek to enforce or have a determination about an ongoing condition of the Lease such as that in the Equity proceedings. Rather, the Common Law proceedings claim damages which are at large for breach of particular provisions of the Lease.
Whilst it is correct that a fact relevant to the Common Law proceedings for damages is the destruction of the Building by fire, the legal relationship giving rise to the claim for damages is different from the enforcement of a clause of the Lease about the ongoing rental. There is, arguably, no correspondence in the rights being sought separately to be advanced.
In my view, there is a reasonable argument that no cause of action estoppel arises.
As to whether an Anshun estoppel arises, that would depend upon a finding of unreasonable conduct on the part of United for its failure to bring the claim for damages in the Equity proceedings in circumstances where it could have done so.
There is no clear-cut answer to the factual question as to whether the conduct of United was unreasonable. On the facts available to me in these interlocutory proceedings, there is a reasonable argument that United was entitled to bring the claim for damages in the Common Law proceedings, and not in the Equity proceedings, because of the nature of the claims being made in the Common Law proceedings against Whitehorn and the Council. It is reasonably arguable that there was a risk to United that unless they put all three claims for damages together in the one suit, they may not have received full compensation for their losses arising from the fire or, alternatively, it was necessary to do so to avoid any risk of double compensation between those defendants against whom United had a viable cause of action.
I have used the term "reasonably arguable" in this discussion to indicate that I am not satisfied to a high degree of probability that the case is so clear as to be one which warrants summary judgment. I should not be taken to express any view as to the ultimate outcome of whether or not any defence by way of cause of action estoppel or Anshun estoppel can be made out by Coastal.
It is for these reasons that the following orders will be made.

Orders

I make the following orders: 1. Notice of Motion filed 19 September 2023 by the third defendant is dismissed. 2. Third defendant to pay the plaintiff's costs of the Motion. 3. Each of the first and second defendants to pay their own costs of the Motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 December 2023

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