RAHME v COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, MEAGHER JJA and Hope AJA 3 December 1991, 20 December 1991 [1991] NSWCA 230 "ANSHUN" TYPE PRECLUSION — customer of bank makes a claim for damages and other relief against bank (and others) suffered because of changes in exchange rate in connection with foreign currency borrowings through bank — claim brought in Federal Court alleging a number of causes of action — lengthy evidence given dealing with course of events between customer and bank — customer's claim dismissed — appeal to Full Federal Court dismissed — special leave to appeal to High Court granted limited to a point not relevant to present proceedings — customer then commences proceedings in Supreme Court for relief against bank in regard to securities given in connection with foreign currency borrowings — proceedings based on two causes of action not relied on as such in Federal Court proceedings — in Supreme Court at first instance customer held precluded from bringing claim because circumstances fall within rule in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 — on appeal, customer claims rule does not apply — facts and causes of action considered — held, appeal fails. ORDERS 1. Appeal dismissed. 2. Respondent's costs to be borne by appellants. Priestley JA Background to appeal in 1990 Supreme Court Proceedings. Events leading to 1988 Federal Court proceedings. Mr Rahme was a builder. He and his wife ("the appellants") worked together in a building business which they conducted, at least in part, through companies they controlled. In 1984, the appellants needed finance for purposes of their business. They banked at the Dee Why branch of the Commonwealth Bank ("the Bank") and spoke there to the manager, Mr Craig, about raising finance. Mr Craig mentioned the possibility of getting a foreign loan at lower interest rates than then available for borrowing in Australia. Mr Rahme said his accountant was not familiar with foreign currency loans. Mr Craig mentioned the names of three accountants who he thought were knowledgeable in this area. Mr Rahme chose one who practised locally. This was Mr Morgan who was subsequently employed by the appellants in their dealings with the Bank in obtaining loans in foreign currency and the transactions that afterwards took place in dealing with the loans. There were two main loan transactions, one in 1984 and the other in 1985. The 1984 transaction was with one of the associated companies, the 1985 transaction with another. A guarantee which the appellants had given to the Bank in 1983, with a mortgage of land as supporting security, was agreed to be used as part of the security for the 1984 loan transaction. Another guarantee, with a mortgage of other land as supporting security, was given to the Bank by the appellants in 1985 as part of the security for the 1985 loan transaction. Because of changes in the rate of exchange of Australian dollars for Swiss francs became necessary for the borrowers to pay many more Australian dollars in discharge of their loan obligations than had been anticipated at the time the loans were arranged. To meet their increased obligations they had to sell a number of properties which they had intended to hold. In their view such sales caused them considerable loss. 2 UNREPORTED JUDGMENTS Federal Court Proceedings. In 1988 the appellants and two companies which they controlled and had been parties to the loan arrangements began proceedings as applicants in the Federal Court claiming damages from the Bank, Mr Craig and Mr Morgan as respondents. Their claims alleged causes of action for: negligent advice; breach of a contractual duty of care; breach of the Trade Practices Act; fraud; breach of fiduciary duty; relief against penalty rates; and one based on s261 of the Income Tax Assessment act. Speaking generally, the appellants alleged that the respondents were responsible for all the losses allegedly suffered by the appellants and their companies because of their entry into the foreign currency borrowings, that the respondents should pay to them and their companies the damages they had suffered, and that a number of the contractual arrangements made between the Bank and some or all of the applicants in the Federal Court and various securities should be declared void. Included among these securities were the two guarantees, and the two mortgages: see para 5 of the appellant's application to the Federal Court, Schedule C to that application, and para 67 of the Further Amended Statement of Claim. The Federal Court proceedings were heard by Hill J. They took about seventeen hearing days of which about fourteen were spent in the taking of evidence and three in the making of submissions. On 11 May 1989 Hill J published detailed reasons for dismissing the applicants' claims against all respondents. The unsuccessful applicants appealed to the Full Federal Court. That court (Lockhart, Beaumont and Gummow JJ) on 10 May 1990 published detailed reasons for ordering that the appeals be dismissed: David Securities Pty Ltd v Commonwealth Bank (1990) 23 FLR 1. Commencement of Supreme Court proceedings. In July 1990 the appellants began proceedings in the Common Law Division of this court against the Bank as defendant in which they claimed declarations that they had been induced to give the two guarantees by the Bank's unconscionable conduct, alternatively declarations that the agreements pursuant to which the mortgages had been given were unjust within the meaning of s7(1)(a) of the Contracts Review Act 1980, and orders setting aside the mortgages so far as they purported to secure any moneys payable under the guarantees, and consequential declarations and orders. Application for special leave to High Court. On 12 October 1990 an application for special leave to appeal generally to the High Court from the decision of the Full Federal Court was dismissed; special leave was granted limited to one point only, concerning the question whether the appellants were entitled to recover some payments of withholding tax allegedly made because of a mistake of law by the appellants: David Securities Pty Ltd v Commonwealth Bank (1990) 20 Leg Rep SL 2. This point is not material to the present proceedings. Bank moves to enforce guarantees and mortgages. By notices dated 24 October 1990 the Bank demanded payment from the appellants of the amounts due under the mortgages securing the two guarantees. The Supreme Court proceedings continued. On 21 November 1990 the appellants were given leave to amend their statement of claim in the Supreme Court proceedings. The amended statement of claim, which included references to the notices of demand of 24 October 1990 was filed on 4 December 1990. URJ RAHME v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 3 The Bank then filed a defence which asserted, in para 22, that the appellants were precluded from raising the claims in their statement of claim "by reason of principles of res judicata, cause of action estoppel, issue estoppel, the principle in Anshun, and the principle of merger in judgment by reason of the claims made and determined in the Federal Court Proceedings between the parties". On 8 February 1991 the court ordered that the question raised by par 22 be tried separately and in advance of the balance of the proceedings. Bryson J heard the proceedings on this separate question on 11 February 1991 and on 28 February 1991 published reasons for making, and made, orders declaring the appellants were precluded from raising the claims in their Supreme Court proceedings by reason of the claims made and determined in the Federal Court proceedings. He also ordered that the appellants pay the Bank's costs of the separate question; he then dismissed the proceedings with costs. The appellants then appealed to this court. Arguments for the appellants. Contracts Review Act claim. For the appellants it was argued that Bryson J was wrong in applying what was called the anshun principle to this claim. The case referred to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 was a sequel to an action in which a plaintiff sued two defendants for damages for personal injuries and succeeded against both. In the same proceedings each defendant claimed contribution from the other. One defendant, Anshun Pty Ltd ("Anshun") succeeded in recovering ninety per cent contribution from the other, Port of Melbourne Authority ("the Authority"). The Authority recovered ten per cent contribution from Anshun. In later and separate proceedings the Authority claimed, pursuant to an indemnity in an agreement between the Authority and Anshun, that Anshun was bound to indemnify it for what it had had to pay to the plaintiff in the personal injury proceedings. Gibbs CJ, Mason J and Aickin J in joint reasons first held that the indemnity claim could have been litigated in the first proceedings. They next held that the Authority was not barred from later bringing the indemnity claim either by the doctrine of res judicata, or issue estoppel in the strict sense (at 597). They then said that the critical issue was whether the case fell within the extended principle expressed by Wigram VC in Henderson v Henderson (1843) 3 Hare 100, 67 ER 313. The passage they then cited (at 598) said: "where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, in advertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time." (at 115, 319) They then mentioned that the principle had been affirmed by the Privy Council on four occasions, in two of which it was applied to shut out litigation of an issue which could and should have been litigated in earlier proceedings (at 598). They next discussed various aspects of the principle, including situations where (1) what was brought forward in defence to the second proceeding was matter which 4 UNREPORTED JUDGMENTS would have provided a defence to the first but was not raised, (2) what was brought forward in the second proceeding was a cause of action which could have been relied on as a defence in the first proceeding, but was not, and (3) a second proceeding upon a cause of action which could have been raised as a cause of action in the first proceeding, but was not. In regard to category (2), they said "there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiffs claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding." (at 602) They then went on to discuss category (3) in a way suggesting that it was subject to the same considerations as category (2). The relevance of considering both categories was that Gibbs CJ, Mason J and Aickin J took the view that the Authority's claim before them fell into both categories; as "a contractual indemnity' it was a "cause of action" (at 604) and it also "was a defence to Anshun's claim in the first action" (later at 604). In dealing with these two categories they said the indemnity claim "was so closely connected with the subject matter of [the first] action that it was to be expected that it would be relied upon as a defence to that claim and as a basis for recovery by the Authority from Anshun" (at 604). Then, in the second last sentence of their reasons, they made it plain that the basis of their decision that the Authority could not bring the second proceeding was "that it was unreasonable for the Authority to refrain from raising its case of indemnity for disposition in the first action" (at 604). The decision of Gibbs CJ and Mason and Aickin JJ in Anshun seems to me to be authority for the following propositions: 1, that Wigram VC's extended principle as stated in Henderson is accepted as good law by the High Court; 2, that that principle applies, inter alia, to category (3) cases, that is to a proceeding in which a party is asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second proceeding is being brought; and 3, that the extended principle of Henderson will be applied to the second proceeding when it was unreasonable for the party asserting the cause of action in that second proceeding to refrain from raising it in the earlier proceeding against the same opponent party. The questions on the present ground of appeal therefore become whether the claim sought to be raised in the Supreme Court under the Contracts Review Act (a) could have been raised in the Federal Court proceedings and (b) raised matters so clearly part of the subject matter of the Federal Court proceedings that it was unreasonable on the part of the appellants not to have raised that claim in those proceedings. Having stated question (b) in the way I have, I should make it clear that I do not attach critical importance to the particular words of the formula. Bryson J had said that any facts related to the causes of action pressed before Hill J "which might have put forward to grant relief under the Contracts Review Act and the very question of whether relief should be granted under the Act are points which in my finding properly belong to the subject of that litigation, which the plaintiffs URJ RAHME v COMMONWEALTH BANK OF AUSTRALIA (Priestley JA) 5 exercising reasonable diligence certainly ought to have brought forward while conducting their litigation in the Federal Court." The appellants, in their written and oral submissions in this court said the relevant question was: "Was it unreasonable of the appellants to have refrained from raising the claims now made in the proceedings before the Federal Court?" In the circumstances of the present case at least, it seems to me that the three different ways of putting the question raise substantially the same considerations. The appellants' primary submission was that the matters pleaded and particularised in their Contracts Review Act claim in the Supreme Court were different from those raised in the Federal Court proceedings, any exceptions being minor and immaterial. This submission was examined in detail by Bryson J. At pp 14 and 15 of his reasons he listed the paragraphs in the appellant's Further Amended Statement of Claim in the Federal Court which set out at length the facts and different types of claim upon which the appellants relied. He referred also to the written submissions delivered to Hill J following the hearing and before he delivered judgment, as well as to the matters dealt with in the reasons for that judgment, as showing the breadth of what was in issue before Hill J. Then at pp 15 to 17 he considered what was involved in para 15 and para 16 (and the particulars given of those paragraphs) in the amended statement of claim in the Supreme Court proceedings. He stated the result of his comparison as follows: "All the matters complained of in these particulars were also complained of in the proceedings before the Federal Court; particulars may well differ in some respects. The very numerous and detailed particulars in the Federal Court proceedings made it open to the plaintiffs to go into evidence on any matter such as that now alleged with respect to not disclosing the possible operation of the powers of sale, special disabilities of the plaintiffs, comparison in the bargaining positions, the availability of opportunities for negotiations and advice and the capacity of the plaintiffs to protect their interest having regard to their grasp of the English language or the language of the documents, the availability of advice to them and any explanations which were given. Indeed the evidence before me, most particularly the written submissions and the judgment of Hill J indicates that most or perhaps all of those matters in fact were the subject of evidence before his Honour." A little later, at p 18, he said: "In my view all or practically all of the facts upon which reliance on the Contracts Review Act could be based were points upon which, according to the pleadings, the Federal Court of Australia was actually required by the parties to form an opinion and pronounce judgment, although it may be that the development of the proceedings was such that some of them were not explicitly addressed in the reasons for judgment. " Having listened to the earnest efforts of the appellants' counsel to show why Bryson J was wrong in these conclusions, and having retraced his steps through the relevant materials, I cannot see that he made any mistake in his deliberations. Having redone the exercise independently, I have come to the same conclusions. It is for this reason I have not thought it necessary to repeat the detail of the process; there is no material difference between the way in which Bryson J has set out the matter and my own views. 6 UNREPORTED JUDGMENTS There is no doubt that the Federal Court had jurisdiction to entertain a claim under the Contracts Review Act. Whether or not it had that jurisdiction before the cross-vesting legislation came into operation may be arguable, although it seems to me reasonably clear that the Federal Court was at that time able to deal with such a claim at the same time as dealing with claims for which it had explicit jurisdiction involving the same set of commercial circumstances. It is however unnecessary to answer this question definitively in this case because the cross-vesting legislation became operative on | July 1988 and the hearing before Hill J took place early in 1989. Even if there had been doubt about the jurisdiction of the Federal Court to entertain the Contracts Review Act claim before July 1988, after that date there was no doubt about the matter and an appropriate application to amend the proceedings to enable the Contract Review Act claim to be dealt with at the same time as the other claimed causes of action would have been granted as of course. In the proceedings before Hm J, the whole of the dealings between the appellants and the Bank were the subject of extensive evidence by the relevant witnesses who were thoroughly examined. The documentation which had come into existence in the course of the transactions was before the court. Hill J in his reasons dealt with many factual issues. The rules in Anshun and the extended principle in Henderson seem to me to be very appropriate for application in the present case. To allow the Contracts Review Act claim to go forward would unavoidably mean that much of the same ground would be gone over all over again. This process would involve waste on a large scale. It would open up the possibility of a second court reaching results in consistent with what had been decided at great labour and expense by another court of equal authority. To add to this, a hearing on the Contracts Review Act claim would become extremely complicated. Many factual matters were decided between the appellants and the Bank in the Federal Court proceedings. As Dixon J said in Blair v Curran (1939) 62 CLR 464: "A judicial determination directly involving an issue of fact... disposes once for as of the issue, so that it cannot afterwards be raised between the same parties or their privies." (at 531) The hearing in the Supreme Court, if allowed to go forward, would involve an endless dredging through the previous proceedings to identify the issues of fact decided by Hill J which the parties would be estopped from relitigating. In my opinion, Bryson J was right in his decision that the appellants were precluded from raising their Contracts Review Act claim in the Supreme Court proceedings. The unconscionability claim. In my view the same position must be reached on this claim as that in regard to the Contracts Review Act claim. If there is any difference, the position is clearer in regard to this claim than the other. This is because it seems to me quite possible that virtually every material issue of fact involved in this claim was dealt with in one form or another by Hill J, so that the various issue estoppels resulting would, in their totality, require an answer to the claim without any room for further fact finding in the Supreme Court. I have not however done the lengthy analysis which would be necessary to see whether that possibility is in fact the case. It is more efficient in the present case simply to rely on the extended principle of Henderson and say that as that principle has been interpreted in Anshun it requires, for the reasons I have already given, that the appellants be precluded from raising the unconscionability claim in the Supreme Court proceedings. URJ RAHME v COMMONWEALTH BANK OF AUSTRALIA (Hope AJA) Meagher JA I agree with Priestley JA. Hope AJA I agree with Priestley JA. 5 Conclusion. In my opinion the appeal should be dismissed with costs. Counsel for Appellant: JM SPENDER QC / M CLARK Solicitors for Appellant: ISENBERG SPEDDING and PLAYER Counsel for Respondent: A R EMMETT QC / J E MARSHALL Solicitors for Respondent: L E TAYLOR