Warner v Hung, in the matter of Bellpac Pty Limited [2012] FCA 819 | Case summary

REASONS FOR JUDGMENT 1 On 30 September 2011, I published my reasons (the Earlier Reasons) for the conclusions that I reached following the trial of this proceeding (see Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123). In these reasons, I shall use terms in the way that they were defined in the Earlier Reasons. 2 The proceeding involves a dispute over the beneficial ownership of $2 million out of a total of $10 million of convertible bonds that were issued to Bellpac by Gujarat, and remain registered in the name of Bellpac. The Liquidators and Bellpac seek a declaration that Bellpac is entitled to beneficial ownership of the $2 million of convertible bonds as against Ken Hung and Austcorp, who are the first and second defendants. Ken Hung's attempt to become registered as the holder of the convertible bonds prompted the commencement of the proceeding. Ken Hung sought registration on the basis of a chain of transfers involving the convertible bonds, to which I refer in the Earlier Reasons as the Impugned Transactions. The questions that were tried before me in the proceeding chiefly concerned the existence and effect of the Impugned Transactions. A related issue concerned whether the Impugned Transactions could be characterised as uncommercial, insolvent or unreasonable director-related transactions, as those terms are defined by the Corporations Act. 3 As I indicated in the Earlier Reasons (see [38]), the Impugned Transactions that were asserted by Ken Hung and Austcorp to give rise to Ken Hung's beneficial ownership of the $2 million of convertible bonds were as follows: on 6 August 2008, Bellpac assigned its interest in all $10 million of convertible bonds to Shan Pei; on 6 August 2008, Shan Pei assigned its interest in all $10 million of convertible bonds to Alfred Wong; on 17 October 2008, Alfred Wong assigned his interest in the relevant $2 million of convertible bonds to Austcorp; and on 17 November 2009, Austcorp assigned its interest in that $2 million of convertible bonds to Ken Hung. In the Earlier Reasons (see [140]-[144]), I concluded that there was no assignment by Bellpac to Shan Pei of the $10 million of convertible bonds, and that, as a consequence, there was no assignment by Shan Pei to Alfred Wong of the $10 million of convertible bonds. I therefore concluded that Alfred Wong acquired no interest in the convertible bonds, and, accordingly, could not transfer any interest in the convertible bonds to Austcorp, which, in turn, had no interest to transfer to Ken Hung. 4 I therefore concluded that the Liquidators and Bellpac would be entitled to a declaration that Bellpac is the true owner of the $2 million of convertible bonds. However, I also indicated (see [224]) a possible difficulty that might arise upon the making of the declarations and orders that I foreshadowed. The difficulty involved the position of other registered holders of convertible bonds issued by Gujarat, who were not parties to the proceeding (the Other Holders). Gujarat had originally issued $10 million of convertible bonds to Bellpac. In the Earlier Reasons (see [31]), I referred to schedules specifying particulars of the current registered holders of the convertible bonds. The schedules indicated that $4 million of the original $10 million of convertible bonds are registered in the name of Bellpac. Of that $4 million, $2 million are the subject of the Impugned Transactions. The remaining $6 million of convertible bonds are registered in the name of the Other Holders as follows: Good Team Investments Limited $1 million Great Investments Limited $2 million Mr Hong Xu $1 million Mr Osmond Tze Leung Kwok $2 million 5 The circumstances in which the Other Holders became registered as the holders of convertible bonds were not made the subject of evidence at the trial of this proceeding. However, in the Earlier Reasons, I indicated that my findings and conclusions had the potential to affect the title of the Other Holders, despite the fact that only the ownership of $2 million of the convertible bonds had been put in issue during the trial before me. That was so because the first two Impugned Transactions involved assignments of interests in all $10 million of the convertible bonds. In the Earlier Reasons, as I have said, I concluded that there were no effective transactions. 6 Having identified in the Earlier Reasons the difficulty just described, I suggested that the appropriate course would be to invite the parties to make submissions as to whether there was any basis upon which the Other Holders should be invited to be heard as to whether the foreshadowed declarations and orders should be made. I also suggested an alternative course, involving the provision by the Liquidators and Bellpac of an undertaking to the Court not to seek to impugn the title of the Other Holders, as a condition of the Court making the declarations and orders. 7 The Liquidators and Bellpac have not given a general undertaking not to impugn the title of the Other Holders. Rather, they have undertaken, in the event that the declaratory relief sought by them is ultimately granted by the Court, not to take any steps to raise any issue estoppel or other estoppel against any non-party to this proceeding in any proceeding commenced by them in connection with the remainder of the $10 million of convertible bonds. An undertaking in those terms appears to leave open the possibility that the Liquidators and Bellpac will commence proceedings seeking to establish that Bellpac remains the beneficial owner of the convertible bonds presently registered in the names of the Other Holders. The exact basis upon which such a claim would be mounted has not yet been formulated. An originating process asserting such a claim was filed after the completion of oral argument. However, that document does little more than specify the relief sought by the Liquidators and Bellpac. It is likely, however, that the claim could give rise to issues identical to some of the issues that were decided in the conclusions that I reached in the Earlier Reasons, although the position of the Other Holders may be different from, and possibly stronger than, that of Austcorp and Ken Hung, since they have the advantage of registration. 8 On 11 February 2012, the Liquidators and Bellpac filed an interlocutory process seeking leave to join the Other Holders as parties to the proceeding. That application was subsequently abandoned, and, on 16 March 2012, the interlocutory process was dismissed. On the previous day, 15 March 2012, the solicitors for the Liquidators and Bellpac had circulated a draft of the orders which they say flow from the Earlier Reasons, and which they now invite the Court to make in the proceeding. Those draft orders include a declaration that Bellpac is the true owner of the $2 million of convertible bonds, an order that Ken Hung deliver up the bond certificates for those bonds, and a costs order in favour of the Liquidators and Bellpac. 9 The possibility of the further agitation of issues that have already been litigated in full before me has now prompted a further amended interlocutory process dated 14 May 2012 (the Dismissal Application). Austcorp and Ken Hung are the applicants on the Dismissal Application. By the Dismissal Application, they seek an order that they be granted leave to file an amended defence asserting that this proceeding is improperly constituted and defective for want of proper joinder, by reason of which the Court is precluded from making any of the orders sought by the Liquidators and Bellpac in the proceeding. They also ask for an order that the proceeding be dismissed for want of proper joinder. Whether or not that relief should be granted is the subject of these reasons. 10 As I have said, evidence was not led at the trial of the proceeding as to the circumstances in which the Other Holders became registered as the holders of convertible bonds. However, in support of the Dismissal Application, affidavit evidence has been adduced as to those matters. In short, that evidence indicates that the Other Holders, in seeking to establish their title, would rely on transfers to them from Bellpac, executed at the behest and instigation of Alfred Wong, on the basis that Alfred Wong was the beneficial owner of the relevant bonds at the time of the respective transfers. Thus, insofar as the Other Holders would assert that their respective entitlements to the convertible bonds registered in their respective names depend upon Alfred Wong's having acquired a beneficial interest by means of the Impugned Transactions, that assertion would raise the question of Alfred Wong's acquisition of such an interest. The assertion, accordingly, would raise several issues that have already been litigated in the trial of the proceeding. Indeed, the assertion is inconsistent with the conclusions that I reached in the Earlier Reasons. 11 As I have said, the exact basis for any future claim by the Liquidators and Bellpac that impugned the title of the Other Holders remains uncertain. The Liquidators and Bellpac may bear the onus of establishing that the entries in the Gujarat register recording transfers to the Other Holders were made without justification or were made erroneously. That could entail their making a case asserting that the Other Holders had participated in some breach of duty on the part of Alfred Wong and Danny Au-Yeung, who was a director of Bellpac at relevant times. Such a case would be akin to the alternative cases described in the Earlier Reasons (see [160]-[190]) and mentioned at [2] above. On the other hand, the case might simply involve the Liquidators and Bellpac asserting that the respective transfers in favour of the Other Holders were executed without the authority of the board of Bellpac. That may cast onto the Other Holders the burden of establishing the validity of the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong. Ultimately, however, it appears inevitable that, if such a claim were brought, the issue of whether Alfred Wong acquired any beneficial interest in the $10 million of convertible bonds would be raised. 12 As appears from the Earlier Reasons (see [30]-[31]), the Liquidators were aware, before the proceeding was commenced, that $6 million of convertible bonds had been transferred to the Other Holders. Their solicitors were told as much by Gujarat's solicitors on 3 November 2009. Nevertheless, the proceeding was commenced on 18 January 2010, without joinder of the Other Holders. The proceeding was commenced as a matter of urgency, in order to obtain interlocutory relief restraining Gujarat from registering the purported transfer of $2 million of the convertible bonds from Bellpac to Ken Hung. On 28 July 2010, the Liquidators filed a further amended originating process and an amended statement of claim, whereby Alfred Wong, Danny Au-Yeung and Shan Pei were joined as defendants. That additional joinder was apparently considered necessary, or at least desirable, because of the challenge to be made to the effectiveness of the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong, at a time when Alfred Wong and Danny Au-Yeung were the directors of Bellpac. 13 It is against all of the above background that the Dismissal Application, with the question that it raises concerning the non-joinder of the Other Parties, must be decided. As I said in the Earlier Reasons, the trial of the proceeding had a somewhat chequered course, and it is highly unfortunate that the joinder question has been raised at this late stage. The only apparent explanation for the matter being raised at this stage is that the question did not occur to any of the parties, or to their legal advisors, until it was raised in the Earlier Reasons. 14 In dealing with the Dismissal Application, I will first say something about the principles surrounding necessary and proper joinder of parties to proceedings. I will then consider in more detail the contentions of the respective parties. 15 In support of the Dismissal Application, Ken Hung and Austcorp now contend that each of the Other Holders is a necessary party to the proceeding, such that, by reason of the non-joinder of the Other Holders, the proceeding is improperly constituted and defective. Consequently, they contend, the Court is precluded from making orders to the effect that Bellpac is the true owner of the $2 million of convertible bonds that are the subject of the Impugned Transactions. 16 Ken Hung and Austcorp rely on the principle that an order that directly affects a third person's rights against, or liabilities to, a party should not be made in a proceeding unless that third person is also joined as a party to that proceeding. If such an order is made, the order will be set aside. Where, before trial, a question arises as to whether a necessary party has not been joined, attention must be directed to the orders sought in the proceeding, in order to determine the effect of the orders upon that third party (see News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 (Super League) at 524-525). 17 Ken Hung and Austcorp contend that any order made by the Court in the present proceeding that Bellpac is the beneficial owner of the $2 million of convertible bonds, on the basis that the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong, were ineffective, would directly affect the right, title and interest of the Other Holders insofar as they acquired that right, title and interest under any of those Impugned Transactions. Alternatively, they say, the making of such an order would give rise to an arguable possibility that the right, title and interest of the Other Holders would be adversely affected. In support of those contentions, Ken Hung and Austcorp advance three main categories of argument. 18 The first category of argument asserts that the effect upon the Other Holders of the declarations and orders now sought by the Liquidators and Bellpac (see above at [9]) would be to preclude the Other Holders from claiming that they are the owners of the convertible bonds registered in their respective names, from claiming any present or future rights, privileges and benefits attached to the convertible bonds registered in their respective names, and from dealing with any of the convertible bonds registered in their respective names. Ken Hung and Austcorp say that the Other Holders would be put in that position without having had the opportunity to participate in the present proceeding by adducing evidence, cross-examining witnesses, making submissions, or raising arguments. 19 In the second category of argument, Ken Hung and Austcorp raise questions relating to rectification and onus of proof that might burden the Other Holders if the declarations and orders sought by the Liquidators and Bellpac were to be made. They say that it may be inferred that, upon the Court's making those declarations and orders, Gujarat would have the names of the Other Holders removed from the register. They say that that possibility has already been raised in communications between Gujarat and the lawyers for Mr Kwok. They say that such action by Gujarat would result in proceedings being instituted by the Other Holders against Gujarat to rectify the register or otherwise to protect their right, title and interest in the convertible bonds registered in their respective names. In such a proceeding, Ken Hung and Austcorp say, the Other Holders would be faced with having to persuade the Court that the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong, were effective, notwithstanding my findings as to those events in the Earlier Reasons. Similarly, they contend, in any proceeding that might be instituted by the Liquidators and Bellpac against the Other Holders, the Other Holders would be subjected to the burden of having to persuade the Court that those Impugned Transactions were effective. 20 In the third category of argument, Ken Hung and Austcorp raise the possibility that the Other Holders may be estopped from asserting their title to, or beneficial ownership of, the convertible bonds registered in their respective names. Thus, Ken Hung and Austcorp contend, the Other Holders may face an argument, in any future claim brought by the Liquidators and Bellpac against the Other Holders, that the issue of title to, or beneficial ownership of, all $10 million of convertible bonds was determined in the Earlier Reasons. That determination, the argument runs, created an issue estoppel precluding the Other Holders from asserting their title to, or beneficial ownership of, the convertible bonds in the future claim. Ken Hung and Austcorp say that the doctrine of issue estoppel could be called in aid by the Liquidators and Bellpac on the basis that the Other Holders are privies in title to parties to the present proceeding, namely Shan Pei and Alfred Wong. In addition to issue estoppel, the question of res judicata has also been raised within the third category of argument. I shall say something below about the distinction between them. 21 It is necessary to consider separately each of the three categories of argument advanced by Ken Hung and Austcorp. First, however, it is desirable to say something about various other bases upon which the Liquidators and Bellpac have sought to resist the Dismissal Application. 22 The Liquidators and Bellpac draw attention to certain provisions of the Federal Court Rules. Order 6 rule 7 of the Federal Court Rules, as in force when this proceeding was commenced and when the hearing took place, provided that a proceeding would not be defeated by reason of the non-joinder of any person as a party, and that the Court might in any proceeding determine the issues or questions in dispute so far as they affect the rights and interests of the parties. With effect from 1 August 2011, prior to the publication of the Earlier Reasons, the current Federal Court Rules came into force. Under r 9.07 of the current Rules, a proceeding will not be defeated only because a person who should have been joined as a proper or necessary party has not been joined. 23 Prior to the Judicature Acts 1873-1875 (UK) (the Judicature Acts), the non-joinder of a necessary party was fatal to a proceeding. The provisions of the Federal Court Rules that I have just described are expressed in terms common to rules of court postdating the Judicature Acts. That is to say, the provisions are intended to give effect to the abolition of the plea in abatement. They are intended to do no more than permit the joinder, after commencement of a proceeding, of additional parties who are either necessary or proper parties, being parties who ought to have been joined in the first instance or whose presence before the Court is necessary in order to enable the Court effectively and completely to adjudicate upon and settle all matters in dispute in the proceeding (see Super League at 523-524). Had the Other Holders been necessary parties, it would have been permissible, notwithstanding that they were not joined when the proceeding was commenced, to join them as parties at a later time in reliance on either O 6 r 7 or r 9.07, as appropriate. Just as Alfred Wong, Danny Au-Yeung and Shan Pei were subsequently joined, so the Other Holders could have been joined. 24 Accordingly, I do not consider that the Liquidators and Bellpac may rely on the Federal Court Rules in answer to the Dismissal Application, whether or not the Other Holders are in fact necessary parties to the proceeding. The relevant rules concern procedure rather than substance, and what is curable rather than what is incurable. The rules do not authorise the making of an order in the absence of a person whose rights against, or liabilities to, any party to the proceeding, in respect of the subject matter of the proceeding, would be directly affected by the order. That is to say, they do not authorise any erosion of the principle set out above at [16] and in the Super League decision. 25 As I have said, the Liquidators and Bellpac have offered an undertaking, in the event that the declaratory relief they seek in the proceeding is ultimately granted, not to take any steps to raise any issue estoppel or other estoppel against any non-party to the proceeding in any proceeding commenced by them in connection with any of the $10 million of convertible bonds, other than the $2 million of convertible bonds whose ownership was put in issue at the trial of this proceeding. However, that undertaking is not satisfactory. It would only suffice if it were not qualified by being confined to estoppel arguments in a future proceeding commenced by them. It would need to extend to any proceeding, whoever might be the moving party. Accordingly, I do not consider that the existence of an undertaking framed in the terms proffered constitutes a basis for refusing the relief sought in the Dismissal Application, if that relief would otherwise be granted. 26 Determining the effect of proposed orders upon a non-party to proceedings is not always a straightforward exercise. As I have said (see [16] above), in circumstances where a question of proper joinder arises before trial, attention must be directed to the orders sought in the proceeding, and the effect of those orders upon the relevant non-party. In the present circumstances, the orders sought by the Liquidators and Bellpac, and circulated on 15 March 2012, are said to reflect the Earlier Reasons, which were published following a full trial and which themselves raised the question of proper joinder. It is clear that the non-joinder of a necessary party will not be cured by giving that person the opportunity to make submissions after the delivery of judgment (see Super League at 527). Nevertheless, the proposed orders provide the appropriate starting point. 27 The orders and declarations proposed by the Liquidators and Bellpac do not, in terms, affect the Other Holders. Declaratory relief is claimed only in respect of the $2 million of convertible bonds in respect of which Ken Hung claims a beneficial interest. The remaining orders are consequential upon that declaratory relief. There is nothing in the proposed orders that would directly operate to strip the Other Holders of the rights associated with the registration of their respective interests in the convertible bonds, or that would otherwise restrain them from dealing with the convertible bonds registered in their respective names. It is therefore clear that no preclusion of the type raised by Ken Hung and Austcorp in their first category of argument could result from the making of those orders. Any step taken by Gujarat, the Liquidators or Bellpac to impugn the title of the Other Holders would not be taken in fulfilment of the proposed orders. Such a step might be informed by the findings that led to the making of those orders, but it would nevertheless be a separate step. Subject to any estoppel question, about which I will say more below, the Other Holders would have the opportunity, if such a step were taken, to be heard in opposition to it. Accordingly, I do not consider that the Other Holders are necessary parties to the present proceeding, in the sense that their rights against a party would be directly affected by the orders that are proposed to be made. 28 It is therefore necessary to consider the second and third categories of argument advanced by Ken Hung and Austcorp. In considering those arguments, the advanced state of the present proceeding assumes greater relevance. Thus, Ken Hung and Austcorp complain, the Liquidators and Bellpac invite the Court to determine the question of effect upon the Other Holders by examining the terms of the proposed orders alone, without regard to the underlying conclusions to which those orders are intended to give effect. They contend that that approach does not properly apply the relevant test. They say that, rather than addressing the direct effect of an order in isolation, the Court should inquire into the effect of the order in the context of the judicial conclusion or determination to which the order seeks to give effect. 29 If that argument be correct, then the prospective effect of the proposed orders upon the Other Holders must be determined with regard to the findings from the Earlier Reasons that provide the basis for the making of those orders, and, in particular, the findings that the Impugned Transactions were not effective. As I have said, evidence put forward in support of the Dismissal Application suggests that the Other Holders would rely on the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong, in order to establish their title to the convertible bonds registered in their respective names. Ken Hung and Austcorp say that the declaratory relief sought by the Liquidators and Bellpac is entirely predicated upon and is intended to give effect to the determination that those Impugned Transactions were ineffective. Accordingly, they say, the rights of the Other Holders would be affected in the requisite sense, should that relief be granted. 30 The second category of argument advanced by Ken Hung and Austcorp essentially presents a number of possible scenarios, which might eventuate following the making of declarations and orders in the terms sought by the Liquidators and Bellpac, and under which the rights of the Other Holders to the convertible bonds registered in their respective names would be compromised. I have briefly adverted to those scenarios above (see [19]). Those scenarios are speculative. They do not flow inevitably from the making of the orders sought. The relevant test is not one of "arguable possibility" that a third party's rights "may be affected", as suggested in the contentions of Ken Hung and Austcorp, but rather a test of direct and actual effect. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases, where the effect of the order on non-parties can be characterised as only indirect or inconsequential (see Super League at 525). Further, every party through whom beneficial ownership was said to pass in the Impugned Transactions was in fact joined in the proceeding. I do not consider that the possible eventuation of the scenarios put forward by Ken Hung and Austcorp has sufficiently direct a connection with the making of the orders now sought as to elevate the Other Holders to the position of necessary parties. 31 The third and most significant category of argument advanced by Ken Hung and Austcorp concerns the possibility that the Other Holders might be estopped, following the making of the orders proposed by the Liquidators and Bellpac, from asserting their title to, or beneficial ownership of, the convertible bonds registered in their respective names. As I indicated above, that requires some consideration of the doctrines of res judicata, or cause of action estoppel, on the one hand, and issue estoppel, on the other hand. I shall say something about each. 32 The doctrine of res judicata is based on a broad rule of public policy, namely interest reipublicae ut sit finis litium: it is in the interest of the state that there be an end to disputes (see Jackson v Goldsmith (1950) 81 CLR 446 at 466). However, that is not the only principle in play. There is another fundamental principle, namely res judicata pro veritate accipitur: a matter decided judicially is to be accepted as correct. Those principles are necessary to protect against the scandal of conflicting decisions (see Rogers v The Queen (1994) 181 CLR 251 at 273). There is good reason for one final judgment to suffice in individual disputes, ne aliter modus litium multiplicatus summam atque inexplicabilem faciat difficultatem, maxime si diversa pronuntiarentur: otherwise the limit of litigation would be greatly increased, creating impossible difficulty, especially if inconsistent judgments are pronounced (Digest 44.2.6). 33 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 earlier proceeding passed into judgment, so that it is merged and no longer has 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 (see Blair v Curran (1939) 62 CLR 464 at 532). As this distinction makes plain, the making of orders and declarations in the terms presently sought by the Liquidators and Bellpac could never enable them to rely on the res judicata doctrine to defeat the rights of the Other Holders. No cause of action would have passed into judgment and merged as between the Liquidators and Bellpac, on the one hand, and the Other Holders, on the other hand. Accordingly, I do not consider that the prospect of a future res judicata argument operates as a sound basis for acceding to the Dismissal Application, and thereby denying the Liquidators and Bellpac the relief to which they might otherwise be entitled. 34 A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, such that it cannot afterwards be raised between the same parties or their privies. The issue estoppel covers only those matters that the prior judgment necessarily established as the legal foundation or justification of its conclusion (see Blair v Curran at 531). Accordingly, it is clear that the principles of issue estoppel are applicable not only as between the immediate parties to a proceeding, but also to persons who are, in law, their privies. Ken Hung and Austcorp contend that the Other Holders are privies in title of Shan Pei and Alfred Wong. The question then arises as to whether, if the orders proposed by the Liquidators and Bellpac were to be made, the finding in the Earlier Reasons that the Impugned Transactions were ineffective constitutes a state of fact necessarily decided by the Earlier Reasons and those orders, for the purposes of a claim brought by the Liquidators and Bellpac against the Other Holders, so as to give rise to an issue estoppel binding the Other Holders. Ken Hung and Austcorp say that such an issue estoppel would indeed arise in those circumstances. 35 However, an assignee whose interest is acquired before a proceeding against the assignor is commenced is not bound by the judgment in that proceeding. In order to estop an assignee, it is necessary to show that the assignee derives title from the assignor by act or operation of law subsequent to the judgment. Further, an assignor cannot, by any statement after parting with his or her interest, impugn the title of the party to whom he or she conveyed that interest (see Spencer Bower and Handley, Res Judicata (4th edition, Butterworths, 2009) at paragraphs 9.39 and 9.40). Although Ken Hung and Austcorp dispute the applicability of those principles in Australian law, they have been unable to draw the Court's attention to any Australian authority to the effect that such a distinction should not be made. 36 In the present circumstances, the interest in the convertible bonds acquired by the Other Holders predates any order that would be made in this proceeding, and, indeed, predates the commencement of the proceeding. Great Investments Limited and Good Team Investments Limited have been registered since December 2008, and Messrs Kwok and Xu have been registered since May 2009. This proceeding was not commenced until January 2010. Accordingly, I do not consider that it would be open to the Liquidators and Bellpac to plead an issue estoppel against the Other Holders, if the Other Holders sought to set up the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong, as an answer to any claim by the Liquidators and Bellpac to be entitled to beneficial ownership of the convertible bonds registered in the respective names of the Other Holders. The prospect of a future issue estoppel argument, therefore, also fails to constitute a sound basis for acceding to the Dismissal Application. 37 While an issue estoppel would not be available to the Liquidators and Bellpac as against the Other Holders, the position would, of course, be different in subsequent proceedings between the Liquidators and Bellpac, on the one hand, and either Shan Pei or Alfred Wong, on the other. If, in any such subsequent proceeding, Shan Pei or Alfred Wong sought to set up and rely upon the validity of the Impugned Transactions of convertible bonds from Bellpac to Shan Pei, or from Shan Pei to Alfred Wong, there might then be an issue estoppel. That is because both Shan Pei and Alfred Wong are parties to this proceeding. 38 I consider that none of the three categories of argument advanced by Ken Hung and Austcorp demonstrates that the making of declarations and orders in the terms proposed by the Liquidators and Bellpac would affect the Other Holders sufficiently to establish them as necessary parties to the present proceeding. However, the failure to join the Other Holders is certainly unsatisfactory. Had the position of the Other Holders been adverted to before the commencement of the hearing of the proceeding, it is highly likely that the Liquidators and Bellpac would have been directed either to join them as parties or to undertake not to impugn their title to the convertible bonds registered in their respective names. I had assumed, from the way in which the proceeding was conducted, that there was no dispute on the part of the Liquidators and Bellpac as to the entitlement of the Other Holders. Hence the suggestion in the Earlier Reasons that an undertaking not to impugn their title be given as a term of making the declarations and orders sought. It is highly unfortunate that the present situation has arisen. 39 If the orders now sought by the Liquidators and Bellpac are made, and the Liquidators and Bellpac subsequently commence a proceeding impugning the title of the Other Holders, there is a possibility that inconsistent judgments will be given in respect of the Impugned Transactions involving Bellpac and Shan Pei, and Shan Pei and Alfred Wong. That is because different evidence might lead to different conclusions as to the alleged transactions said to bring about the Impugned Transactions. For example, Danny Au-Yeung or Eric Ng might be called by one of the parties to give evidence as to the alleged transactions. At present, of course, that is a matter of pure speculation. Nevertheless, the spectre of inconsistent judgments is there. It was apparently not adverted to by the parties, and was raised by me only when, in the course of composing the Earlier Reasons, the possibility became apparent. 40 The avoidance of inconsistent judgments goes to the heart of the doctrines of both res judicata and issue estoppel. I have concluded that neither doctrine would relevantly apply to the present case so as to form a basis for granting the relief sought in the Dismissal Application. The exigencies of litigation, and the differing forensic decisions made by parties in different proceedings, can lead to inconsistent judgments. It is conceivable that that could occur in the present circumstances. While inconsistent judgments are clearly to be avoided where possible, the risk of a future inconsistent judgment does not, in itself, necessarily justify a refusal to grant relief in the light of conclusions that a judge may have reached in a particular proceeding. Thus, the chance that a future proceeding will result in a judgment inconsistent with the Earlier Reasons does not, without more, in my view, constitute a basis for acceding to the Dismissal Application. 41 Further, other elements of the present circumstances indicate that Ken Hung and Austcorp should be required to show more than a mere possibility of inconsistent judgments in order for the Dismissal Application to succeed. First, although the Liquidators and Bellpac have offered no general undertaking to refrain from impugning the rights of the Other Holders, the nature of any proceeding in which they may impugn those rights is currently a matter of some speculation, notwithstanding that, as I have said, an originating process commencing such a proceeding has now been filed with the Court. Secondly, the Dismissal Application is, in effect, quite opportunistic. Ken Hung and Austcorp appear to bring it as a tactical measure to avoid the consequences of an unfavourable judgment. They do not bring it on behalf of the Other Holders whose interests they say would be adversely affected by the making of orders and declarations in the terms sought by the Liquidators and Bellpac. They do not assert that any interest of theirs has been affected by the non-joinder of the Other Holders. Nor would they have an interest in any subsequent proceeding in which the title of the Other Holders was impugned. Thirdly, I am mindful that the Liquidators and Bellpac, the plaintiffs in the present proceeding, are, in a sense, representative parties, in that this proceeding has been brought on behalf of the unsecured creditors of Bellpac and, ultimately, if there is a surplus, of the contributories of Bellpac. 42 In all of the circumstances, I do not consider that the Other Holders are persons whose rights against, or liabilities to, any party to this proceeding would be directly affected by the orders now proposed by the Liquidators and Bellpac. While their joinder would certainly have been desirable, I do not consider that they were necessary parties to this proceeding. Accordingly, the Dismissal Application should be dismissed. It follows that declarations and orders along the lines proposed by the Liquidators and Bellpac should be made. In the light of that conclusion, it is appropriate now to invite the parties to make submissions as to the costs of the proceeding. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Warner v Hung, in the matter of Bellpac Pty Limited

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