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[2009] WASCA 29
Court of Appeal (WA)
2009-02-02
Wheeler JA
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : WILLOUGHBY -v- CLAYTON UTZ [No 2] [2009] WASCA 29
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Citation : WILLOUGHBY -v- CLAYTON UTZ [2007] WASC 281
Estoppel - Res judicata - First action by appellants against respondent for damages for alleged negligence and breach of contract - First action dismissed because causes of action vested in Official Trustee in Bankruptcy - Causes of action then assigned to appellants - Second action commenced - Summary judgment application by respondent - Whether res judicata defence bound to succeed
Stare decisis - Whether court should follow New South Wales Court of Appeal decision - Common law of Australia
Estoppel - Second action commenced more than six years after accrual of causes of action - Whether any arguable case that the respondent should be estopped from relying on limitation defence
Acknowledgment - Whether deed of assignment of causes of action contained an acknowledgment which extended the limitation period
Limitation Act 1935 (WA), s 44
Rules of the Supreme Court 1971 (WA), O 16 r 1, O 21 r 7
2 PULLIN JA: This appeal is against the order of Acting Master Chapman dismissing the appellants' action in CIV 1764 of 2005 against the respondent. The order was made on the respondent's application for summary judgment pursuant to O 16 r 1, or alternatively that the originating process and statement of claim be struck out in the court's inherent jurisdiction.
3 Two main issues were raised in the grounds of appeal as they stood at the beginning of the hearing of this appeal. The first was whether the action had already been determined in earlier proceedings and were therefore res judicata. The second was whether it was arguable that the respondent's conduct made it unconscionable for the respondent to rely on a foreshadowed limitation defence which was otherwise bound to succeed. A third point was raised during the hearing of the appeal. That is referred to later in these reasons.
(a) 10 December 1990: the appellants were declared bankrupt;
(b) 23 November 1993: the appellants who were involved as plaintiffs in an action against a finance company settled the action on this date. The respondent acted as solicitors for the appellants and advised regarding the settlement. The appellants allege that the respondent gave negligent and misleading advice which led the appellants to settle on the terms which they did. The appellants further allege that they suffered loss as a result of the reliance on the advice and that in consequence there arose on this date causes of action in tort and in contract (Causes of Action). There is no dispute that six years was the limitation period in relation to all the Causes of Action;
(c) 18 August 1997: on this date the first appellant (who with the other appellants had previously been declared bankrupt in December 1990 and discharged from bankruptcy in January 1994) was declared bankrupt again. The second appellant was also declared bankrupt for a second time on 25 November 1997;
(d) 22 December 1998: the appellants commenced proceedings in the Federal Court and pleaded Causes of Action. These proceedings were later transferred under the cross-vesting legislation to the Supreme Court of Western Australia and became action number CIV 2233 of 2003 ('First Action'). There is no dispute that when
the First Action was commenced the Causes of Action were vested in the official trustee. Why this is so is explained in Willoughby v Clayton Utz [2005] WASC 47; (2005) 193 FLR 373 [24] - [25];
(e) 14 April 1999: the official trustee offered to assign the Causes of Action to the appellants and the respondent but received an offer from Lawcover and on this day by deed assigned the Causes of Action to Lawcover (the Lawcover Deed of Assignment). Lawcover was the respondent's insurer in relation to the claims brought against the respondent by the appellants in the First Action;
(f) 22 November 1999: the expiration of six years from the accrual of the Causes of Action;
(g) 20 June 2001: the appellants sought a review of the official trustee's decision to assign the Causes of Action to Lawcover which was ultimately successful on this day when Nicholson J in the Federal Court, ordered that the official trustee should assign the Causes of Action to the appellants;
(h) 29 May 2002: in compliance with Nicholson J's judgment the official trustee assigned the Causes of Action to the appellants who on this date became the owners of the Causes of Action. The appellants then wrongly assumed that this meant they could continue with the First Action;
(i) 30 March 2005: Master Newnes (as his Honour then was) made an order dismissing the First Action on the basis that when the First Action had been commenced by the appellants, the Causes of Action had been vested in the official trustee and that in consequence the appellants had 'no standing to bring the [First] [A]ction'; Willoughby v Clayton Utz [25]; that the subsequent assignment did not 'retrospectively validate' the proceedings and that in consequence when the First Action was brought the appellants 'had no cause of action' [29];
(j) 28 June 2005: the appellants commenced a new action against the respondent in the Supreme Court in action number CIV 1764 of 2005 (Second Action) pleading the Causes of Action or as the appellants conceded causes of action 'essentially the same' as the Causes of Action which had been pleaded in the First Action. The Second Action was therefore commenced more than 13 years after the accrual of the Causes of Action;
(k) 27 November 2007: Acting Master Chapman dismissed the Second Action on the basis that the Causes of Action pleaded were res judicata because of the judgment of dismissal in the First Action. The acting master also held that in any event the respondent was bound to succeed on a defence that the limitation period had expired and that nothing had been raised to support the appellants' contention that the respondent should be estopped from relying on the limitation defence.
5 The two main points raised in the grounds of appeal as they stood at the commencement of the hearing were:
(a) that the acting master erred in concluding that the doctrine of res judicata meant that the Second Action was bound to be dismissed; and
(b) the acting master erred in his conclusion that it was not arguable that the respondent was estopped from relying on a limitation defence which was otherwise bound to succeed.
6 During the course of oral submissions, counsel for the appellants submitted that the Lawcover Deed of Assignment contained an 'acknowledgment' by the respondent. The 'acknowledgment' was asserted to be an acknowledgment by Lawcover, on behalf of the respondent, as to the existence and validity of the Causes of Action and that this was an 'acknowledgment' within the meaning of s 44 of the Limitation Act 1935 (WA) and that in consequence 'time ceased to run against the appellants'. This resulted in an application by the appellants for leave to amend the grounds of appeal to add a new ground to that effect, the precise terms of which are set out later in these reasons. The parties were given leave to file written submissions. They have been received and considered by the court.
7 If the appellants succeed in establishing that the acting master erred in concluding that the res judicata defence was bound to succeed, they must also succeed on either the estoppel ground or the acknowledgment ground if they are to succeed in having the acting master's order set aside. This is because if neither of those two grounds are made out, the Causes of Action are unquestionably statute barred.
Principles governing application for summary judgment
8 The power to order summary judgment has to be exercised with great care and should never be exercised unless it is clear there is no real question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. The court should also avoid stifling the development of the law by summarily disposing of actions in respect of which there is a debatable question of law involved (see Southern Region Pty Ltd v The Minister for Police and Emergency Services for and on behalf of the State of Victoria [2003] VSCA 105 [14], (Phillips JA, Winneke P and Buchanan JA agreeing)) or where there is a reasonable possibility that it will be found in the development of the law, still embryonic, that a cause of action does lie: Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365, 373 - 374.
9 The issue is whether the judgment of Master Newnes dismissing the First Action meant that the Second Action was bound to fail because the Causes of Action had been judicially determined and merged in the judgment of dismissal in the First Action, and were therefore res judicata.
10 The defence of res judicata was referred to by Dixon J in Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 where his Honour said:
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. 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 former proceedings passed into judgment, so that it is merged and has no longer 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 (531 - 532).
11 In Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446, Fullagar J in a dissenting judgment said that in effect that the expressions 'res judicata' and 'issue estoppel' should be used in relation to two separate concepts. He noted that:
The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action (466).
In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings (467).
[I]t follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose (467).
12 The distinction between 'res judicata' and 'issue estoppel' is now well accepted in Australia. See for example Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. In that case Gibbs CJ, Mason and Aickin JJ said:
The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which is merged into judgment in a prior proceeding (597).
13 In Chamberlain v Deputy Commission of Taxation [1988] HCA 21; (1988) 164 CLR 502 the deputy commissioner brought an action for payment of income tax due by a tax payer and judgment was mistakenly entered for less than the amount actually due. Rather than trying to correct the judgment, the deputy commissioner simply brought a second action for recovery of the balance. The action was held to be not maintainable because the cause of action had merged in the judgment thereby destroying its independent existence while the judgment stood. In the majority judgment their Honours said:
The point of the present appeal is that the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it is not competent for the respondent to bring further proceedings in respect of the same cause of action. It is no answer to say that the Court might, if appropriate, stay the second action as an abuse of process. The impediment goes deeper than that; res judicata may sustain a plea of abuse of process but in that case the appropriate remedy is to strike out the later action ... So long as the respondent chooses, as he does, to take no step to set aside the judgment and to raise no issue in the second action as to the circumstances in which that judgment was obtained, he must accept the consequences of res judicata ... the matter is not one for the discretion of the Court; by operation of law the cause of action relied upon by the respondent has ceased to exist (510 - 511).
14 In Spencer Bower, Turner & Handley, Res Judicata (3rd ed, 1996) [19], the authors state that a party setting up res judicata as a bar to an opponent's claim must establish the following constituent elements, namely:
(a) the decision was judicial in the relevant sense;
(c) the tribunal or court had jurisdiction over the parties and the subject matter;
(e) it determined the same question as that raised in the later litigation; and
(f) the parties to the later litigation were either parties to the earlier litigation or their privies, or the earlier decision was in rem.
15 There is no issue in this case that the judgment of Master Newnes was a judicial decision; that it was pronounced, and that the court had jurisdiction over the parties and the subject matter. Questions arise in this case concerning the last three elements referred to above. A question also arises as to what may be examined in order to decide whether causes of action are res judicata.
16 There may in some cases be another question about the meaning of the expression 'cause of action'; see the observations in Port of Melbourne Authority v Anshun, 611 (Brennan J). However, as in Anshun, and as in Chamberlain's case, the possible different meanings give rise to no difficulty in this case. That is because it was conceded before the acting master that causes of action in the First Action and in the Second Action were 'essentially the same in the broadest possible sense' . If there were some slight difference then the respondent submitted that the extended principle of res judicata as explained in Anshun would pick up and extinguish the slight differences that might exist in the formulation of the claims in the First Action and in the Second Action. There was no submission to the contrary from the appellants on that point. The result is that the Causes of Action pleaded in the First Action can be regarded as the same as pleaded in the Second Action.
17 Fullagar J said in Jackson v Goldsmith that where the plea is of res judicata 'only the actual record is relevant' (467). The question arises, and has been raised in this case, as to what constitutes the 'actual record'.
18 Counsel for the appellants submitted that the reasons for judgment of Master Newnes in the First Action should be examined, and that if they were, it would be observed that no decision was made on the merits of the Causes of Action. Instead it was only decided that the appellants had no standing to sue because the official trustee, and not the appellants, was the owner of the Causes of Action.
19 Counsel for the respondent submitted that the record consisted only of the statement of claim in the First Action, the judgment in the First Action and the statement of claim in the Second Action. Counsel for the respondent submitted that it was 'unnecessary' and 'wrong' to examine the reasons given for the judgment. He supported this by a reference to the fact that Fullagar J said in Jackson v Goldsmith when examining the question about what was involved in issue estoppel as opposed to res judicata, said that:
Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose (467).
20 It is not absolutely clear from what was said by Fullagar J, that the reasons for judgment are not relevant in relation to a plea of res judicata. It is not clear because if the reasons for judgment are 'particularly important' in relation to issue estoppel, then it is open to inquire whether Fullagar J meant that the reasons were important in relation to res judicata and issue estoppel but 'particularly' important in relation to the latter.
21 The submission of counsel for the respondent might at first appear to be contrary to what is said at [204] in Spencer Bower, Turner & Handley, Res Judicata. This depends upon how the paragraph is understood. It reads:
It was formerly considered that the subject matter of a decision for the purposes of res judicata could only be ascertained from the formal judgment or order and the court could not examine 'what was said by the judges'. The previous author was in some doubt but preferred the view that the court's reasons could be considered. There were then many cases favouring the broader view.
Since then the law has been settled in favour of the broader view. In R v Humphrys [[1977] AC 1 at 41] Lord Hailsham said: 'The court will inquire into realities, and not mere technicalities', and in Rogers v R [(1984) 181 CLR 251 at 263] Brennan J said that the court could look at 'any material that shows what issues were raised and decided'. The point now seems to be assumed. Thus in Thrasyvoulou [[1990] 2 AC 273] the House considered reports of planning inspectors. In Arnold [[1991] 2 AC 93] it held that issue estoppel was excluded because of the special circumstances but that question could not be investigated if the court were confined to the pleadings and the order [204] - [205] (footnotes omitted).
22 Discussion about this paragraph appears in the reasons for decision in Pollnow v Armstrong [2000] NSWCA 245. Reference to what was said in that case appears a little further on in these reasons.
23 Pollnow's case stands as authority for the proposition that the record consists of the pleadings and the judgment or order but not the reasons for judgment or order. In Pollnow's case there had been earlier proceedings concerning a claim against property which had failed. The trial judge, Cohen J, in the subsequent proceedings, upheld a defence plea of res judicata. Meagher JA said that 'it is hardly surprising' that the trial judge dismissed the proceedings and said that he was 'happy to adopt' Cohen J's reasons as his own. There was a submission on appeal that the parties were different in the two proceedings, but at [8] Meagher JA said that:
[O]ne can say of the later proceedings that they involve exactly the same claim over the same property by the same plaintiff against the same defendant as in the earlier cases. This is, one would have thought, and as Cohen J held, a classic situation for the application of the doctrine of res judicata.
24 Counsel who appeared for the appellants in the Pollnow case conceded that at first impression this was so, but then argued that there had 'never has been a judicial finding on whether the deed of nomination' which was necessary to make effective a trust propounded in those earlier proceedings. Meagher JA said that this submission was 'based on a false premise'. He then continued:
The doctrine of res judicata is concerned with results not reasons. Whether the trust failed because oral evidence to the contrary was believed, or because the deed relied on had been revoked, or because it related to different property from that claimed, or because it could not be proved ... simply does not matter: if the trust alleged is found not to exist, the doctrine of res judicata will prevent further proceedings based on the same allegation [9].
25 Reference was then made to Arnold v National Westminster Bank Pty Ltd [1991] 2 AC 93, 104 and to what Meagher JA described as the 'quaint doctrine' suggested by Lord Keith to the effect that in relation to issue estoppel (not res judicata) there may be an exception to the doctrine where further material becomes available to a party after the earlier determination. Meagher JA then said that as Pollnow's case involved a 'true res judicata', there was 'not much point in discussing what the situation would be if it were merely issue estoppel'. In that regard, Meagher JA referred to [204] in Spencer Bower, Turner and Handley and added:
In the circumstances, and in the absence of any binding authority requiring the application of Arnold's case to res judicata, I am of the view that for the purposes of res judicata one is restricted to the examination of the plaintiff's pleadings and the court's orders [13].
26 Priestley JA agreed, as did Sheller JA. Priestley JA added:
In regard to para 204 of the third edition of Spencer, Bower on Res Judicata, on the second paragraph of which counsel for the appellant relied (and which is set out in Meagher JA's reasons), I think counsel's reliance on it was due to a misunderstanding. The passages preceding para 204, and the cases cited in the second paragraph of para 204 itself for that matter, make it plain that the second paragraph is dealing with that branch of res judicata called issue estoppel, and not the main and original doctrine of res judicata, now frequently called in England cause of action estoppel. The two branches are substantially different and confusion between them would be lessened if the English habit of describing issue estoppel as a branch of res judicata were abandoned. At all events, none of the cases cited in para 204 gives the appellant in the present case any basis for escaping from the established rules of res judicata (properly so called and distinct from issue estoppel) referred to by Meagher JA in his reasons [42].
27 Pollnow's case should be followed unless it is plainly wrong. See Farah Constructions Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [135]. In my view Pollnow's case was correct. When Fullagar J in Jackson Goldsmith referred to the 'actual record' and when he said that reasons for judgment were particularly important in relation to the plea of issue estoppel, he should be taken also to mean that the reasons for judgment were not relevant to a plea of res judicata.
28 The result is that counsel for the respondent was correct when he submitted that reasons for judgment are not part of the record to be examined when deciding whether the Causes of Action have already been determined in an earlier action. However, the reasons for judgment are relevant and may be examined to determine whether the Causes of Action in the First Action were decided 'on the merits' or were 'litigated'.
29 'Litigated' is the word used by Fullagar J in Jackson v Goldsmith, 467. The phrase 'on the merits' was used in Carl-Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853, 918, 927, 933, 935 and 969. The expression has been referred to in a number of other cases. See, for example, Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508; Marshall v The Town Planning Appeal Tribunal of Western Australia [2006] WASCA 146 [15]; and Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) [No 2] [2008] WASCA 109 [34]. It was not necessary in any of those cases to consider precisely what was meant by the phrase 'on the merits'. Spencer Bower, Turner and Handley, Res Judicata states that this 'separate requirement' had been clarified since the second edition of the book [173]. The author concludes that a decision which is on 'purely procedural grounds' is not a decision on the merits [174] - [175]. In DSV Silo-und Verwaltungsgesellschaft Mbh v Owners of the Sennar (No 2) [1985] 1 WLR 490, Lord Brandon said that 'a decision on procedure alone is not a decision on the merits', 499. He said that looking at the matter positively:
[A] decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned (499).
Was the First Action 'litigated' or decided 'on the merits'?
30 It is arguable that the judgment of Master Newnes was not a decision on the merits. In deciding whether the case was decided on the merits, the reasons for the master's judgment may be examined. This is not to contradict the decision in Pollnow's case. The reasons for judgment may be examined for the limited purpose of examining what had happened leading up to the judgment. If by reading the reasons the conclusion is reached that the Causes of Action were in fact being 'litigated' or decided 'on the merits' then the reasons must be put aside and only the pleadings and judgment examined to decide whether the defence of res judicata is made out. What Master Newnes' reasons reveal is that the Causes of Action were never examined or dealt with at all. They were not 'litigated'. What was 'litigated' in the hearing before Master Newnes in the First Action was whether or not the appellants had standing to sue. The 'merits' of that point only were considered. Only that point became res judicata. This is arguably analogous to a case which is dismissed because the plaintiff has sued in a tribunal which does not have jurisdiction. That will not support a plea of res judicata when the proceedings are commenced in the correct court or tribunal. See Pinnock Brothers v Lewis & Peat Ltd [1923] KB 690.
31 Finally on this ground, reference should be made to the decision of Rogers v Legal Services Commission (SA) (1995) 64 SASR 572 because the appellants placed great reliance on it. They submitted it was analogous to this case. In the Rogers case, the Full Court of the Supreme Court of South Australia, Cox, Prior and Lander JJ, concluded that, in the First Action referred to as 'the first proceedings', the plaintiff's case had been struck out for failure to disclose a clear cause of action known to the law. As a result, the plaintiff then issued another set of proceedings claiming breach of statutory duty, negligence in relation to false statements and advice, and misfeasance in a public office (referred to by Lander J as 'the second proceedings'). The defendant raised the defence of res judicata and applied for summary judgment. The master entered judgment against the plaintiff, finding that the cause of action in negligence was res judicata and that the pleadings failed to disclose a cause of action of misfeasance in a public office. The Full Court allowed the appeal.
32 Lander J gave detailed reasons and the other two judges agreed with him. Lander J said that he had been unable to find any authority directly bearing on the matter agitated in that appeal and that this was likely to have been so because of the unusual circumstances of that case, 593. The precise form of the order in the first proceedings is not set out, but it is described at page 579 as an order which struck out the statement of claim and the proceedings and resulted in the proceedings being 'dismissed'. Lander J made the obvious point that if there must be correspondence between the cause of action in the first proceedings and the cause of action in the second which allows the doctrine of res judicata to apply, then:
The very nature of the order, ie that the proceedings are dismissed because the proceedings do not identify a cause of action, rather suggests that the cause of action could not have been disposed of, because, in fact the finding is that there was no cause of action, and therefore no cause of action could have merged into the judgment (593).
33 This must mean that if, in that case, the statement of claim in the first proceedings had been laid side-by-side with the statement of claim in the second proceedings, there would have been no correspondence between them. Rogers' case is therefore different from this case because the causes of action pleaded in the statement of claim in the first proceedings did not correspond with those pleaded in the second proceedings. In this case the Causes of Action do correspond. In this case there is no dispute that when the statements of claim in the First Action and Second Action are laid side-by-side, that the Causes of Action appear in both.
Was Master Newnes' judgment a final judgment
34 The way to determine whether a judgment is a final judgment is to ask whether another application for summary judgment could have been brought. See Licul v Corney [1976] HCA 6; (1976) 180 CLR 213, 225.
35 In my opinion, the judgment of Master Newnes was final and no submission was put to the contrary. No second application for judgment could have been brought because the respondent had obtained the judgment it wanted. The only way Master Newnes' judgment could be challenged was on appeal. Indeed it was challenged by the appellants on appeal to this court and the appeal was dismissed and special leave to appeal to the High Court was refused.
36 The result on this ground is that the acting master erred in concluding that the defence of res judicata was bound to succeed. He should have concluded that it was arguable that it would not succeed because the Causes of Action had not been 'litigated' or decided 'on the merits'. Ground 1(a) should be upheld.
37 However, the appellants will not succeed on the appeal unless they succeed in showing that they have an arguable case concerning their claim that the respondent should be estopped from relying on the foreshadowed limitation defence or succeed in showing that it is arguable that there was an acknowledgment within the meaning of s 44 which would prevent time running.
38 Limitation questions should not be decided before trial except in the clearest of cases. See Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, 533. This is a clear case because there is no doubt that unless it is arguable that the respondent is estopped from pleading the limitation defence or it is arguable that there is a relevant acknowledgment, then a limitation defence must succeed. The appellants did not dispute that the limitation period for bringing actions in relation to the Causes of Action expired six years after the accrual of the Causes of Action on 23 November 1993. There was no dispute that absent estoppel or acknowledgment, the time expired for suing on the Causes of Action in November 1999. The Second Action was not commenced until 2005.
Is it arguable that the respondent may be estopped from succeeding on its foreshadowed limitation defence?
39 When the official trustee assigned the Causes of Action to Lawcover on 14 April 1999, the limitation period had not expired. The appellants argue that there was 'unconscionable' conduct on the part of the respondent and that they should be estopped from relying upon the foreshadowed limitation defence. The appellants' argument was not well articulated. It was characterised by the use of generalised allegations of 'unfairness' rather than by an appeal to legal or equitable principle. As best it can be understood, the argument runs as follows.
40 Before 14 April 1999, the official trustee offered to assign the Causes of Action to both the appellants and the respondent. There was no evidence, but it may be assumed, that the respondent informed its insurer Lawcover about the offer. As a result of this information, the appellants allege that Lawcover 'wrongfully' made an offer to the official trustee which the official trustee accepted and then assigned the Causes of Action to Lawcover. The appellants then sought a review of the official receiver's decision to assign the Causes of Action to Lawcover. Lawcover and the respondent resisted the review proceedings. This delayed the eventual assignment of the Causes of Action to the appellants. It was allegedly 'unconscionable' for the respondent to plead a limitation defence in those circumstances. The appellants did not spell out what representation or assumption was made which would support their assertion that there was an estoppel either at common law or in equity. Rather, the appellants relied on a vague assertion of 'unfairness'. That is enough to dismiss the submission but even the assertion of 'unfairness' has no foundation.
41 For example, there was no reason why the respondent should not inform its insurer that the offer had been made by the official trustee and it was not 'wrongful' for Lawcover to offer to buy the Causes of Action. It was suggested by counsel for the appellants that by Lawcover taking the assignment, it somehow acted on behalf of the respondent or that Lawcover's conduct should be attributed to the respondent. Just because Lawcover was the respondent's insurer did not make it the respondent's agent. Lawcover had a commercial interest in acquiring the Causes of Action. The fact that the Federal Court reviewed the decision of the official trustee to assign the Causes of Action to Lawcover and quashed the decision does not affect that conclusion. There has been no conduct on the part of Lawcover or the respondent which has been identified which could be regarded as 'unconscionable'.
42 However, for the purposes of the appellants' argument let it be assumed that there was some 'wrongful' conduct or unconscionability in the period between 14 April 1999 when the official trustee assigned the Causes of Action to Lawcover until 29 May 2002 when the official trustee assigned the Causes of Action to the appellants; and let it be assumed as correct as the appellants submit, that the respondent should be 'estopped' from asserting that time was running under the Limitation Act, between those two dates. If those assumptions are made the respondent would not be estopped (for reasons mentioned in the next paragraph) from asserting that time began to run again after the Causes of Action were assigned to the appellants on 29 May 2002. On those assumptions there was still about eight more months to run before the limitation period expired after the second of those dates. The appellants did not commence the Second Action in that time.
43 The appellants did not commence proceedings until over two years after the assignment of the Causes of Action to them. This was because they were of the opinion that the First Action was on foot and sustainable. The fact is that their opinion was wrong. By the time the appellants did commence the Second Action and making all of the assumptions the appellants ask the court to make, the limitation defence had to succeed. Equity intervenes to grant relief so as to do what is required in order to avoid detriment to the party who has relied upon any assumption induced by the party estopped, but no more. See Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 [45]. The respondent points out in their notice of contention that the appellants were in a position after the Causes of Action were assigned to them to commence the Second Action and still be within the limitation period (if it be accepted that the respondent should be estopped from relying on the running of time between 14 April 1999 and 29 May 2002). The appellants delayed commencing the Second Action until June 2005. As mentioned, this was because the appellants assumed and persisted with an argument that the First Action was sustainable when it was not. The appellants finally had to accept this when the High Court refused leave to appeal to advance that argument. The assumption was not fostered by the respondent.
44 Thus, the appellants fail in this aspect of their appeal and it is therefore not necessary to deal with the respondent's notice of contention.
45 During the hearing of the appeal the appellants sought leave to amend their grounds of appeal by including a ground to read:
The learned acting master erred in law by failing to take into account s 44(1) of the Limitation Act 1935 by which the respondent is estopped from reliance on the operation of s 38 of the said Act from the date of the acknowledgment.
46 The appellants were given leave to file written submissions which have been received by the court.
47 Section 44(1) of the Limitation Act 1935 reads:
Except as expressly provided in this Act, nothing in s 38 contained shall take away or lessen the effect of any acknowledgment or promise, or of any acknowledgment by part payment or satisfaction on account of principle or interest due, and except as aforesaid any such acknowledgment or promise shall have the same effect as if this Act had not been passed.
48 Section 38 is the section which contained the limitation period of 6 years in relation to actions in tort and actions in contract.
49 The appellants contended that an acknowledgment was to be found in the deed of assignment dated 14 April 1999 between the Official Trustee in Bankruptcy and Lawcover Pty Ltd.
50 The recitals and relevant operative provisions of that deed read:
2.1 undertakes not to transfer or vest the action or the underlying causes of action to any person or entity (unless required to do so by a court order), and
2.2 consents to the TPA Causes being dismissed.
51 It may be observed that the respondent is not a party to this deed at all, and as to that the appellants' written submissions state:
The respondent's professional indemnity insurer, after becoming aware of the causes of action, then purchased the causes of action from the appellant's trustee in bankruptcy in April 1999 ... it is submitted that on the facts as currently disclosed, this could only have occurred in privity with the respondent.
52 The appellants in effect submit that Lawcover was the respondent's agent. The appellants submit that 'a matter such as the true nature of the respondent's relationship with LawCover and the extent of their privity leaves open the serious question to be tried' and that such relationship 'could involve subrogation or agency'. Elsewhere in the written submissions the appellants state:
In the appellants' submission, the deed of assignment operates as an 'acknowledgment' of the cause of action within the meaning of that term used in s 44(1) of the Limitation Act 1935.
53 The appellants say that the ordinary meaning of the word 'acknowledge' means to accept or admit the existence or truth of. The appellants submit that the most common use of the term 'acknowledgment' is usually in the context of the cause of action lying in debt and refers to Busch v Stevens [1963] 1 QB 1; Bucknell v Commercial Banking Co of Sydney Ltd [1937] HCA 35; (1937) 58 CLR 155. However, it is submitted that there is no reason to limit the utility or use of the term to actions lying in debt.
54 Finally, the appellants submit that because s 44(1) states that the acknowledgment operates 'as if this Act had not been passed'. Once the acknowledgment had been made 'no statutory limitation period ... ever begins to run'. They are forced to run this argument because if the acknowledgment only gave the appellants another six years they were still out of time because the deed is dated 14 April 1999 and the Second Action was commenced six years and two months later in June 2005.
55 The respondent answers these submissions by first contending that the Supreme Court (Court of Appeal) Rules 2005 (WA) (Court of Appeal Rules) do not 'directly' provide for the amendment of grounds of appeal other than by a single judge of appeal prior to the hearing of the appeal. That submission must be rejected. A single judge is merely exercising the delegated power of the Court of Appeal itself and the rule conferring power on the single judge of appeal, by implication, acknowledges that the Court of Appeal itself has the power to allow an amendment and to make the other orders that a single judge of appeal may make. In any event, r 5 of the Court of Appeal Rules applies the Rules of the Supreme Court and O 21 r 7 empowers the court to order any document to be amended.
56 The respondent submits that leave to amend should be refused as a matter of discretion. The respondent points to the fact that at par 13 of the acting master's reasons the appellants' concession that all applicable limitation periods had expired before the action was commenced is recorded. The respondent submits that the appellants should not be permitted to depart from their earlier concession in the absence of exceptional circumstances and without good reason. The appellants have not filed an affidavit in support of the application and the court may therefore infer that the appellants are unable to adduce evidence of any good reason for their failure to raise the issue before the acting master or in their grounds of appeal, and the court may infer that there are no exceptional circumstances. See University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481, 483. The respondent also submits that the proposed ground is without merit. It submits that:
(a) on its proper construction the deed does not contain an acknowledgment within the meaning of s 44(1);
(b) even if the deed properly construed had effect as an acknowledgment it was not by, or binding upon, the respondent; and
(c) even if the deed properly construed had effect as an acknowledgment by, or binding upon, the respondent, the limitation period had nonetheless expired before the action was commenced, despite that acknowledgment.
Section 44(1) of the Limitation Act 1935 (WA)
57 The Limitation Act 1935 (WA) was repealed by the Limitation Legislation Amendment & Repeal Act 2005 (WA). However, s 4(2) in pt 2 of that Act provides that the 1935 Act continues to apply, despite its repeal and the enactment of the Limitation Act 2005 (WA), to causes of action that accrued before the commencement day, namely 15 November 2005. Neither party made any submissions about the history behind s 44(1). It is not possible to understand what the section means without referring to that history.
58 On settlement of an Australian colony the common law and the statute law of England was introduced into the colony unless it was a law of local policy adopted solely to the locality in which it was made: Delohery v Permanent Trustee Co of NSW [1904] HCA 10; (1904) 1 CLR 283, 310. The Limitation Act 1623 (UK) (21 Jac 1, c 16) was not a law of local policy. It was received by Western Australia on the settlement of this colony. See Law Reform Commission of Western Australia, Discussion Paper on Limitation and Notice of Actions, (1992) par 2.9. The limitation period imposed by the 1623 English legislation for actions on the case which includes claims based on simple contract or tort was six years. See Halsbury, vol 19, The Laws of England (1st ed), 37.
59 There developed some judge-made law, perhaps dating from the time of the Restoration (see Spencer v Hemmerde [1922] 2 AC 507, 534 - 535 (Lord Sumner)) which was directed to 'the task of decorously disregarding an Act of Parliament' (Lord Sumner (519)) to the effect that if an acknowledgment of a debt or a liquidated pecuniary claim was made by the person owing the money then the limitation period of six years ran from the date of the acknowledgment. See Halsbury, vol 19, The Laws of England (1st ed), 58 - 59; Busch v Stevens. Lord Tenterden's Act (9 Geo 4, c 14), set out in part in Spencer v Hemmerde (512), modified the common law and required such an acknowledgment to be in writing (enacted in this State as s 44(3) of the Limitation Act 1935). An acknowledgment outside the limitation period was effective to extend the limitation period: Halsbury, vol 19, The Laws of England (1st ed), 59.
60 The Limitation Act 1935 (WA) re-enacted inter alia the Limitation Act 1623 (UK) and imposed a limitation period of six years in relation to claims based on simple contract or in tort (see s 38). However, s 44(1) provided if there was an acknowledgment, the limitation periods in s 38 did not apply. The acknowledgment had 'the same effect as if this Act had not been passed'.
61 If the Limitation Act 1935 (WA) had not been passed, then the six year limitation period imposed in relation to simple contracts and tort by the Limitation Act 1623 (UK) continued to apply, as did the common law rule relating to the effect of acknowledgments in relation to debts. The existence of the common law rule was referred to by Master Newnes in Cameron v Murdoch [2003] WASC 264(S) [33].
62 However, an acknowledgment of the existence of causes of action for damages for breach of contract or for claims in tort were of no effect before the Limitation Act 1935 (WA) was passed. See Boydell v Drummond [1808] EngR 8; (1808) 2 Camp 157; 170 ER 1114; Hurst v Parker (1817) 1 B & Ald 92; 106 ER 34; Halsbury, vol 19, The Laws of England (1st ed), 60 [99]. The doctrine of acknowledgment related only to acknowledgments by a debtor regarding the debt he owed or regarding the existence of a liquidated pecuniary claim. See generally Spencer v Hemmerde. The result is that even if the deed did contain an acknowledgment of the existence of a cause of action for damages for breach of contract or damages for the tort of negligence, it was not an acknowledgment extending the limitation period recognised by the common law and therefore s 44(1) of the Limitation Act 1935 (WA) did not apply and the limitation periods in s 38 of that Act did apply.
63 This ground therefore has no merit for a number of reasons.
(a) First, even if an acknowledgment by the respondent that there were valid Causes of Action could be detected in the deed, it had no effect because an acknowledgment with respect to actions for damages for breach of contract or in tort was not an acknowledgment that fell within the common law rule and therefore s 44(1) did not apply.
(b) Secondly, even if that were wrong, there was no acknowledgment in the deed that the Causes of Action were good. The recitals merely record (in par D) that the action was based on acts or omissions 'alleged' against the respondent.
(c) Thirdly, even if that be wrong, Lawcover was not the agent or 'privy' of the respondent. Privity is not established by proof of concern in the outcome. See Spencer Bower, Turner & Handley, Res Judicata [231]. The mere fact that Lawcover was the respondent's insurer does not make Lawcover the respondent's privy.
(d) Fourthly, even if that were wrong, and the deed contained an acknowledgment recognised at common law, then time began running again from the date of the alleged acknowledgment in the deed and expired six years later and before the commencement of the Second Action. See Halsbury, vol 19, The Laws of England (1st ed) [95].
(e) Fifthly, the appellants had, in the proceedings before the acting master, conceded that the limitation period had expired before the
Second Action was commenced (apart from the estoppel argument) and the appellants should not be permitted to raise an issue contrary to the concession.
64 As a result, leave to amend by adding this ground should be refused.
65 I should finally briefly mention a ground of appeal which attempted to raise a fourth point and to allege error by the acting master by first attributing to the acting master some reasons which he did not give and then challenging the putative reasons. The ground read on its own did not make sense. It read:
Even if the court had not erred in [concluding that the Second Action was res judicata] the court had no cause to rely upon the relevant principles espoused in Lee v St George Bank Ltd [2006] WASC 221 at 100.
66 Counsel for the appellants explained that the reference in Lee v St George Bank Ltd [2006] WASC 221 was to [82] not to [100] and the written submissions explained that the ground was supposed to indicate that the acting master erred in not applying what was said in that paragraph. However, reference to that paragraph in Lee's case reveals that it sets out matters to which the court may have regard when deciding whether the proceedings amount to an abuse of process. The acting master was aware of these matters but did not consider them because he decided the case not by concluding that the Second Action was an abuse of process, but because of res judicata. This ground should be dismissed.
(a) ground one upheld and the other grounds dismissed;
(b) leave to add the new ground of appeal should be refused;
(1982) 44 ALR 365
(1981) 147 CLR 589
(1937) 58 CLR 155
(1904) 1 CLR 283
(1983) 154 CLR 87
(1939) 62 CLR 464
(1950) 81 CLR 446
(1988) 164 CLR 502
(2007) 230 CLR 89
(1991) 23 NSWLR 508
(2005) 193 FLR 373
(1995) 64 SASR 572
(1976) 180 CLR 213
(1992) 175 CLR 514
(1999) 196 CLR 101
(1985) 59 ALJR 481