MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, SHELLER and COLE, JJA 12-13 December 1995, 21 February 1996 [1996] NSWCA 340 MORTGAGE — application of s512 Companies (NSW) Code — whether it renders mortgage void — whether new grounds can be argued in later proceedings. Held: res judicata applies — proceedings relating to mortgage to be permanently stayed On 1 June 1989, Nippon Credit Australia Ltd (Nippon) entered into a facility agreement with Girvan Corporation Ltd (Girvan Australia). Pursuant to that agreement, Maronis Holdings Ltd (Maronis) gave a registered mortgage, over certain property it owned, to Nippon. The land, known as "Cross Roads", was located at Liverpool, New South Wales. The mortgage was executed on | June, and registered with the number Y434669. Nippon also held a guarantee by Maronis and Girvan Corporation (New Zealand) Ltd (Girvan NZ) as security. On 14 February 1990, Nippon gave notice pursuant to s57(2)(b) of the Real Property Act 1900 (NSW) to Maronis that it was intending to exercise its power of sale under the mortgage because there had been default on the facility agreement. On 26 March, Maronis's then solicitors, Freehill Hollingdale and Page, wrote to Nippon and asserted that the mortgage was void by reason of the operation of s512 Companies (NSW) Code. On 28 March 1990 Maronis lodged a caveat over the land subject to the mortgage registered number Y434669, and this was registered the following day. On 29 March, Maronis began proceedings seeking, inter alia, a declaration that the mortgage dated 1 June 1989 was void. Nippon filed a cross-claim on 7 May 1990 seeking to have the caveat removed from the register, and a notice of motion seeking a separate hearing, pursuant to Pt31 Supreme Court Rules, on the question whether the mortgage was void under s512(1) Companies (NSW) Code. On 21 May 1990 Maronis filed an amended notice of motion which challenged the validity of the notices given under s57(2)(b) and which sought an injunction restraining Nippon from exercising its power of sale. On the same day McLelland J made, by consent, orders for a separate hearing of the questions whether the mortgage was void or unenforceable and the notices valid and to the effect that if it be held that the mortgage was neither void nor unenforceable, Maronis's summons would be dismissed and the caveat would be removed from the register. Rogers CJ Comm D conducted the separate hearing, and gave judgment on 23 May. His Honour rejected Maronis's argument. Two days later an order was made that the summons be dismissed, the caveat be removed from the register and Maronis pay Nippon's costs. On 7 April 1994 Maronis and Girvan (NZ) began further proceedings against, inter alias, Nippon, for a declaration that the mortgage and guarantee were invalid or unenforceable for reasons going to the circumstances in which they were executed. Nippon applied to have the 1994 proceedings against it in regard to the Cross Roads mortgage dismissed or alternatively struck out or permanently stayed. Windeyer J applied the principles propounded in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 HELD: (1) Maronis could not seek to re-litigate the issue of whether the mortgage was void or unenforceable. Per Sheller JA; Res judicata was a complete defence to this part of the claim, and consequently the proceedings, in so far as they related to the mortgage, were correctly stayed. 2 UNREPORTED JUDGMENTS (2) It was well within Windeyer J's discretion to conclude that since Maronis refrained from litigating any grounds other than the claim under s512 Companies (NSW) Code in the 1990 proceedings, it should not be permitted to litigate new grounds in later proceedings. There were no special circumstances justifying Maronis's failure to advance other grounds in the earlier proceedings to support its claim that the mortgage was void or unenforceable. To adopt a new position in the 1994 proceedings would raise the possibility of contradictory judgments and was thus unreasonable. Henderson v Henderson [1843] 3 Hare 100; 67 ER 313; Port of Melbourne Authority v Anshun Pty Ltd at 603-4 per Gibbs CJ, Mason and Aicken JJ. ORDERS 1. Leave to the appellant to file and serve an amended notice of appeal adding the additional ground 18 and the additional orders sought 7 and 8 set out in the document filed in Court on and dated 13 December 1995. 2. Appeal allowed to the extent of setting aside O.1 entered on 21 October 1994 and substituting the following order: 1. As between the First Plaintiff and the First Defendant the proceedings be permanently stayed in so far as they concern the validity of the Cross Roads mortgage (as that term is defined in para 18(b) of the Statement of Claim); 3. Otherwise appeal dismissed and the orders entered on 21 October 1994 confirmed. 4. The appellant to pay the respondent's costs of appeal. Mahoney JA I have had the advantage of reading in draft the judgment prepared by Sheller JA. I agree with his Honour's conclusions and generally with the reasons that he has detailed. Notwithstanding the submissions of Mr Emmett QC, I think it is clear that, when the parties came to litigate the question whether the relevant securities were void or unenforceable, the attack upon the securities was limited; the appellant abandoned any ground other than the statutory ground to which, before McLelland CJ in Eq and otherwise, it had referred. It was the clear intention that the issue whether the securities were void or unenforceable was to be determined finally by reference to the statutory ground alone. It was, I think, upon that basis that Young J was invited to make the orders which he made. The answers to the questions given by Rogers CJ of Comm D did not, of course, dispose of the proceeding. It was the subsequent orders which terminated it. But the proceeding was terminated upon the basis that the voidability and enforceability of the securities had been finally determined. Upon this basis, I am of opinion that it is not now open to litigate again the question whether the securities are void or unenforceable. I am inclined to think that, in principle, this is so because of the considerations referred to Anshun. But, however that be, I agree with Sheller JA that the Nippon company should succeed in the present litigation. I agree with the orders proposed by Sheller JA. Sheller JA INTRODUCTION On | June 1989 Nippon Credit Australia Ltd (Nippon) lent Girvan Corporation Ltd (Girvan Australia) $15 million on the terms and conditions set forth in a facility agreement of that date. A condition precedent to drawdown was that Nippon hold as security a first registered mortgage by Maronis Holdings Ltd (Maronis) of land it owned known as "Cross Roads" at Liverpool, New South Wales and a guarantee by Maronis and Girvan Corporation (New Zealand) Ltd (Girvan NZ). On 1 June Maronis executed the mortgage (the Cross Roads Mortgage), which was registered with the number Y434669. URJ MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Sheller JA) 3 In 1994 Maronis and Girvan NZ began proceedings ED 1946/94 (the 1994 proceedings) against seven defendants or groups of defendants, of which Nippon was the first, claiming against Nippon a declaration that the securities were invalid and unenforceable. In paral9 of the statement of claim filed on 7 April 1994 Maronis and Girvan NZ alleged that the securities, although purporting to have been, were not in fact executed by them or on their behalf for the following reasons: (a) the Purported Resolutions, on the basis of which the Securities were executed, were invalid for the reasons set forth in paral7; (b) the third defendant, a director of Girvan Australia, who purported to execute the Girvan NZ Guarantee as attorney for Girvan NZ, did not in fact hold a power of attorney from Girvan NZ for the purpose of executing the Girvan NZ Guarantee or at all; (c) the Purported Resolutions (the validity of which was denied) purported only to authorise the affixing of Girvan NZ's common seal to the Girvan NZ Guarantee and not the execution of such document by power of attorney; (d) the third defendant, who purported to execute the Maronis guarantee and the Cross Roads Mortgage by affixing, or witnessing the affixing of, the common seal of Maronis was not a director of Maronis and had no authority to execute those documents on behalf of Maronis; (e) the parties who passed the Purported Resolutions and purported to execute the Securities on behalf of Girvan NZ and Maronis did not turn their minds to the interests of those companies. Instead, they acted solely in the interests of Girvan Australia in order to facilitate the Loan which was to be used for Girvan Australia's own purposes; (f) the making of the Loan and the giving of the Securities were of no commercial benefit to Maronis or to Girvan NZ and no intelligent and honest person in the position of a director of Maronis and/or Girvan NZ could have reasonably believed as at | June 1989 that these transactions were for the benefit of those companies. The reasons referred and set forth in paral7 of the statement of claim were: (a) no notice of the purported meeting of the directors of Maronis had been given to the directors of Maronis not absent from New Zealand in breach of Article 98 of that company's Articles of Association; (b) no notice of the purported meeting of the directors of Girvan NZ had been given to the directors of Girvan NZ not absent from their country of normal residency in breach of Article 110 of that company's Articles of Association; (c) neither the third defendant nor the fourth defendant, also a director of Girvan Australia, were directors of Maronis; (d) neither the third defendant nor the fourth defendant had authority, either actual or ostensible, to pass the Purported Resolutions or make any decision to bind Maronis; (e) the fourth defendant was not a director of Girvan NZ; (f) the fourth defendant had no authority, either actual or ostensible, to pass the Purported Resolutions or to make any decision to bind Girvan NZ; and (g) the necessary quorum of three directors was not present at the purported meeting of directors of Girvan NZ. In para21 of the statement of claim Maronis and Girvan NZ claimed as follows: 4 UNREPORTED JUDGMENTS "Nippon knew or was put on inquiry regarding the matters referred to in paral9 because it knew or should have known at the time it received the Securities that: (a) Girvan NZ was a publicly listed company in New Zealand; (b) Maronis was substantially owned by and a member of the Girvan NZ Group of Companies; (c) The provision of the Securities was not of any apparent commercial benefit to Maronis nor Girvan NZ; (d) The so called 'directors' who handled the purported giving of the Securities by Maronis and Girvan were also directors of Girvan Australia and were therefore in a position where their duties to the individual companies were in conflict; (e) None of the independent directors of Maronis and Girvan NZ, being those directors who were not also directors of Girvan Australia, was involved in the Purported Resolutions nor in execution of the Securities; (f) A quorum of Girvan NZ directors was not present at its purported meeting on 1 June 1989 which was or should have been apparent on the face of the minute of that purported meeting; (g) The third and fourth defendants had no authority to pass the Purported Resolutions or to execute the Securities on behalf of the plaintiff companies; and (h) The third defendant sought to execute the Girvan NZ guarantee on behalf of that Company not by affixing the common seal but as attorney and without producing any evidence to the first defendant that he held a power of attorney from Girvan NZ for that purpose." Maronis sought to put before this Court an amended statement of claim filed on 31 May 1995 after the orders were made from which Maronis brings this appeal. In my opinion the amended statement of claim is irrelevant to the appeal and I have ignored it. References in this judgment to the statement of claim are references to that document in its unamended form. By notice of motion filed on 3 May 1994 Nippon applied to have the statement of claim struck out as against it. In its second amended form of 18 August 1994 Nippon moved the Court for: "1. An order that as between (Maronis) and (Nippon) the proceedings in so far as they concern the Cross Roads mortgage be dismissed; 2. In the alternative, an order that as between (Maronis) and (Nippon) the proceedings in so far as they concern the Cross Roads mortgage be struck out or, in the alternative, permanently stayed." THE 1990 PROCEEDINGS Nippon's application was supported by an affidavit of 29 April 1994 by Philip John Kerr, its solicitor, who supervised on Nippon's behalf the conduct of proceedings 2023/90 which Maronis began by summons filed on 29 March 1990 (the 1990 proceedings), seeking, inter alia, a declaration that the mortgage dated 1 June 1989 between Maronis and Nippon was void. In those proceedings, by an amended summons filed on 21 May 1990, Maronis claimed: "1. A declaration that [the Cross Roads Mortgage] between the plaintiff and the defendant ('the Mortgage') is void or unenforceable. 2. Further, and in the alternative, a declaration that in the events which have happened, the defendant has no power to sell the subject land pursuant to the Mortgage or under the Real Property Act 1900 (NSW) ('the Act') upon the URJ MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Sheller JA) 5 expiration of 30 days from service, of two alleged notices under s57(2) (b) of the Act dated 17 and 18 April 1990 respectively without compliance with such notices. 3. An injunction restraining the defendant from exercising a power of sale until the defendant has complied with the provisions of the Real Property Act 1900 (NSW). 4. Damages. 5. Costs." On 28 March 1990 Maronis lodged a caveat prohibiting the recording of any dealing "by any mortgagee pursuant to mortgage registered number Y434669." On 29 March 1990 the caveat was registered with the number Y942038. On 7 May 1990 Nippon filed a cross claim for an order that "the caveat registered number Y942038 at the Land Titles Offices be removed from the Register" and a notice of motion for a separate hearing "on the question of whether, if the mortgage between the Plaintiff as mortgagor and the Defendant at mortgagee registered number Y434669 at the Land Titles Offices was executed by the Plaintiff and registered while the Plaintiff was in breach of s512 (1) of the Companies (NSW) Code, the mortgage would not, for that reason, be void." S512 (1) provided: "A foreign company shall not establish a place of business, or commence to carry on business, within the State unless it is registered under this Division." On 21 May 1990, in accordance with short minutes of order, McLelland J, as his Honour then was, by consent made the following order in the 1990 proceedings: "The Court orders that there be a separate hearing of the following questions based on the Assumed and Agreed Facts filed herewith (the 'Agreed Facts') (it being noted that items 1-7 of the Agreed Facts are assumed solely for the purposes of such hearing): (a) Whether the mortgage dated 1 June 1989 between the plaintiff and the defendant (the 'Mortgage') is void or unenforceable. (b) Whether: (1) the notice dated 17 April 1990, a copy of which is annexed to the Agreed Facts and marked 'K', is a valid and effectual notice under s57(2)(b) of the Real Property Act 1900 (NSW) ('the Act'); (2) the notice dated 18 April 1990, a copy of which is annexed to the Agreed Facts and marked 'L', is a valid and effectual notice under s57(2)(b) of the Act; (3) if the answers to 1(b)(1) and (2) are in the negative, the defendant otherwise has the power to sell the land which is the subject of the Mortgage." In para2 of the short minutes of order the Court noted that, if the answer to paral(a) was in the negative, the parties agreed that the relief sought in paral of the summons should be dismissed and the defendant's cross claim should succeed. The assumed and agreed facts referred to included: "4. the Mortgage and the Guarantee were executed by the plaintiff in New South Wales." In answer to a letter of 12 April 1990 from Nippon's solicitors, on 26 April 1990 Freehill Hollingdale and Page, who were then Maronis's solicitors, wrote a letter which, after canvassing the arguments that the mortgage was void because of the effect of s512(1) of the Companies Code and the acquisition by Girvan Australia of its shares in Girvan NZ possibly void pursuant to New Zealand legislation, continued: "3. CAVEAT Having regard to the aforegoing your request for the undertaking is declined. 6 UNREPORTED JUDGMENTS 4. THE EQUITY DIVISION PROCEEDINGS Having regard to the aforegoing your request for the undertaking is declined. It is envisaged that the summons will be amended to seek relief based on further grounds. 5. GENERAL We are happy to discuss the various aspects of this matter with you further." Mr Kerr deposed in his affidavit as follows: "I note that Maronis did not raise any issue for determination other than the issue arising under s512 of the Companies (NSW) Code. Further, I note that at the directions hearing before his Honour Mr Justice McLelland on 11 May 1990 (after the date of the letter dated 26 April 1990) Mr Robinson, then the junior counsel for Maronis, was asked by his Honour Mr Justice McLelland whether the s512 issue was the sole point upon which Maronis relied to substantiate its allegation that the Mortgage was void. Mr Robinson replied that it was." On 21 May 1990 Rogers CJ Comm D conducted the separate hearing ordered by McLelland J and on 23 May 1990 gave judgment answering both questions adversely to Maronis. On 25 May 1990 an order was made in the following form: "On the basis that both the solicitors for the Plaintiff and counsel for the Defendant agree that the Short Minutes of Order initialled and dated 25 May 1990 by his Honour Mr Justice Young, carry out the reasons for judgment given by Rogers J, THE COURT ORDERS that: 1. The Summons be dismissed. 2. The Caveat Registered No Y942038 at the Land Titles Office be removed from the Register. 3. The Plaintiff and Cross-Defendant pay the Defendant and Cross-Claimant's cost of the proceedings." JUDGMENT AT FIRST INSTANCE On 18 August 1994 Nippon's application, which was treated as one for an order that the 1994 proceedings brought against it by Maronis, in so far as they concerned the Cross Roads Mortgage, be dismissed or permanently stayed pursuant to Ptl3.5 of the Supreme Court Rules, came on for hearing before Windeyer J. His Honour reviewed the facts and remarked that if, in the 1990 proceedings, anything was left to be argued when the s512 point had failed, one would have expected that the decision upon the separate issues would be recorded and the summons stood over for further hearing. But that course was not taken. Orders dismissing the proceedings were made by consent and in accordance with what appeared to be an agreement made pursuant to Pt31 r4(1) of the Supreme Court Rules and recorded in the short minutes of order made by McLelland J. His Honour said it was difficult to see what further argument could be advanced in face of a plea of res judicata, if res judicata in the strict sense were the only estoppel defence raised. Even so he was not satisfied that it would certainly succeed because of the differing formulations of what was meant by "cause of action" and accordingly would not summarily dismiss the proceedings on that ground alone. Windeyer J then considered whether the 1994 proceedings should be dismissed on the ground that they ought reasonably and properly to have been brought as part of the 1990 proceedings; Port of Melbourne Authority v Anshun Pty Ltd (1991) 147 CLR 589. His Honour referred to the evidence of Clive William Currie, a director of Maronis since February 1990, who said that when he instructed Freehills to act in the earlier proceedings his object was to stop URJ MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Sheller JA) 7 Nippon exercising its power of sale and to take what steps were available to preserve the property. Windeyer J said: "He felt time was short; Maronis had no means of paying into court the sum secured by the mortgage as the Cross Roads property was its only asset. He believed that litigation had the potential to be long and expensive and the costs could be $1 million. Other material going to his belief was rejected and the opportunity given to lead the evidence to establish the basis of that belief was not taken up. While this limited evidence might explain the wish to have a speedy trial of certain issues it does not mean the final orders did not determine the mortgage validity question; nor if it were adduced to establish 'special circumstances' as referred to in the much quoted passage in Henderson v Henderson [1843] 3 Hare 100; 67 ER 313 at 115 and 319 is that relevant, see Anshun 613. Nor I should add does it establish there was any mistake in the orders made. The procedure adopted in [the] earlier action to some extent makes it different from others where res judicata and the extended Henderson estoppel principle have been considered. Nevertheless the position is clear. At the conclusion of the hearing on the separate points - and leaving aside the agreement in para2 of the short minutes of order made by McLelland J on 21 July - the plaintiff had two choices: it could either have the decision recorded and continue the action raising any other points available to it to set aside the mortgage; or it could allow the proceedings to be concluded by order bringing to an end its opportunities to attack the validity of the mortgage. It chose the latter. On any basis it is perfectly clear that, had there been no agreement, if any further matter were to be raised there was an opportunity to raise it in the then extant proceedings. I consider it clear it ought to have been so raised; and it would be unreasonable to allow it to be raised in subsequent proceedings brought 4 years later. Any application to withdraw from the agreement and argue further grounds for invalidity should in the same way have been made after the separate issues were determined. This has little to do with prejudice; it is to do with the requirement of certainty and the ending of litigation. If I am wrong on res judicata then I consider the claim falls clearly within the principles in Henderson as expounded by the High Court of Australia in Anshun. If this involves an exercise of discretion (see Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 at 673) then in my view the procedure adopted at trial would require a finding it was unreasonable not to raise all grounds claimed for invalidity so that I consider this is an appropriate matter in which to exercise the powers given by Pt13 r5. If not properly characterised as an abuse of process the claim is vexatious." His Honour said finally: "The appropriate order is to stay permanently that part of the plaintiffs claim as relates to the Cross Roads mortgage. The parties can consider the precise form of order required." O.1 as entered on 21 October 1994 was as follows: "As between [Maronis] and [Nippon] the proceedings be permanently stayed insofar as they concern the Cross Roads mortgage (as that term is defined in paral 8(b) of the Statement of Claim)." On 21 November 1994 Maronis applied to the Court on a summons for leave to appeal from these orders. This application was stood over to the hearing of the appeal and Maronis filed a notice of appeal. On 8 December 1995 Nippon filed a notice of contention and on 13 December Maronis filed a supplementary notice of appeal. 8 UNREPORTED JUDGMENTS APPEAL Every judicial decision which finally disposes of a cause or matter in litigation operates as an estoppel and as a merger; see generally Spencer-Bower and Turner, Res Judicata, (2nd ed), paral - para5. The parties to the litigation or their privies are precluded from disputing against any other party thereto in later litigation the correctness of the earlier decision on any matter of law and fact which the judgment, decree, or order necessarily established as the legal foundation or justification of the conclusion reached by the Court. In addition the decision extinguishes the right or cause of action set up in the proceedings, which merges in the judgment. In Blair v Curran (1939) 62 CLR 464 at 531-2 Dixon J said: "A judicial determination directly involving an issue of fact or of law disposes once for and 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. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded." In Jackson v Goldsmith (1950) 81 CLR 446 at 466 Fullagar J said: "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. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims 'interest reipublicae ut sit finis litium' and 'nemo debet bis vexari pro eadem causa'." Modern practice requires that frequently courts hear and determine disputes without formal pleadings. Where there is pleading the modern system calls for the pleading of facts and the nomination of remedies without the need to assert or identify a legal category of action; see Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 473. Accordingly the doctrine of res judicata must now be applied to take account of the substance of the action disposed of in earlier litigation and brought forward in later proceedings rather than its form; see per Gummow J in Trawl Industries of Australia Pty Ltd (In Liquidation) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 418-9 and per Lindgren J in Bryant v Australian and New Zealand Banking Group Ltd (unreported) 20 September 1995. The decision in Bryant's case concerned a defendant bank's application for summary dismissal of an amended statement of claim in which the plaintiff, Mr Bryant, sought relief based on the conduct of the bank leading to Mr Bryant's execution of mortgages to the bank. In earlier proceedings in the Supreme Court for possession the bank obtained by consent judgment for possession, leave to issue a writ of possession and a verdict on cross claims filed by Mr Bryant seeking orders discharging the mortgages. These cross claims were supported by URJ MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Sheller JA) 9 affidavits in which Mr Bryant alleged that the bank had misinformed him about the interest rates to be charged and that he had signed the mortgages without legal or other advice and without the mortgages being read out and explained to him. He sought relief under the Contracts Review Act 1980 and the Fair Trading Act 1987. Lindgren J said at 29-30 and 33: "At least this is clear: it is not open to a party who has sought one remedy on a cause of action in earlier proceedings to re-litigate on the same cause of action, for the purpose of seeking a different remedy, at least if that different remedy could have been sought in the earlier proceedings; Serrao v Noel [1885] 15 QBD 549 (CA); Anshun at 612 (Brennan J); Van Amstel v Country Roads Board (1961) VR 780 (O'Bryan J); Kingston Commodities Pty Ltd v Sydney Futures Exchange Ltd (unreported) Clarke J, 15 March 1985 at 11-12....In his cross claim in the Supreme Court proceedings Mr Bryant sought only an order discharging the mortgages: he did not seek rectification of them or damages under the general law or under the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (NSW). However, as noted earlier, res judicata cannot be circumvented by the seeking of a different remedy in the subsequent proceedings from that sought in the earlier one." In the 1990 proceedings Maronis sought a declaration that the mortgage of 1 June 1989 between it and Nippon was "void" or "void or unenforceable". Such a declaration would mean that the mortgage although formally in order was of no effect or could not be enforced against Maronis. In the statement of claim filed in the 1994 proceedings Maronis, with the other plaintiff, Girvan NZ, sought against Nippon a declaration that "the Securities are invalid and unenforceable", the securities being the mortgage and guarantees. Mr Emmett QC, who appeared for Maronis, submitted that there was a distinction between a declaration that a mortgage was void and a declaration that it was invalid. While the expression "void" is commonly used when speaking of the consequences of a statutory interdiction (see Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 411) or of fraud (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477) and invalidity in other contexts (see, for example, Chiron Corporation v Organon Teknika (1994) FSR 448) both expressions mean that a document has no effect. An allegation that a document is void or invalid in this sense may be different from an allegation that the party did not execute it. In the statement of claim in the 1994 proceedings Maronis alleged that the mortgage was not executed by it or on its behalf. I do not think this distinction is of any consequence in the present case. The critical features of the present case are: (a) In the 1990 proceedings Maronis sought, in the alternative to a declaration that the mortgage was void or unenforceable, a declaration that "in the events which have happened, [Nippon] has no power to sell the subject land pursuant to the mortgage or under the Real Property Act upon the expiration of thirty days from service of the notices under s57 (2) (b)" and an injunction restraining Nippon from exercising a power of sale until it had complied with the provisions of the Real Property Act, orders which would only be made if the mortgage were valid. (b) By consent on 21 May 1990 the Court ordered a separate hearing of the question whether the mortgage was void or unenforceable, whether the notices were valid and effectual notices under s57(2) (b) of the Real Property Act, and, if not, whether Nippon otherwise had the power to sell the land which was the subject of the mortgage. If the first question was answered in the negative, the 10 UNREPORTED JUDGMENTS parties agreed that the application for a declaration that the mortgage was void or unenforceable should be dismissed and Nippon's cross claim for removal of the caveat should succeed. (c) When McLelland J asked junior counsel for Maronis whether s512 was the sole point upon which Maronis relied to substantiate its allegation that the mortgage was void counsel replied that it was. (d) The hearing on the preliminary point proceeded on the assumption that Maronis executed the mortgage. (e) After Rogers J gave his reasons Maronis agreed with Nippon that the summons should be dismissed and the caveat removed from the Register. In my opinion, these matters point unerringly to the conclusion that the substance of the 1990 proceedings was whether the mortgage from Maronis to Nippon was valid and enforceable and, if so, whether Nippon had given valid and effectual notices under s57(2)(b) of the Real Property Act or otherwise had power to sell the land subject of the mortgage. That part of the 1994 proceedings, which Nippon applied to have summarily dismissed, sought to re-litigate the issue of whether the mortgage was valid and enforceable. In my opinion, res judicata is a clear and complete defence to this part of the claim. I think, with respect, that Windeyer J should have so held and Nippon is entitled to succeed on its notice of contention. Accordingly it is not strictly necessary for me to consider whether alternatively the Anshun principle applies. However a good deal of argument was directed to it and I should say something about this. The argument assumes that a plea of res judicata in the strict sense would not succeed. The principle, the application of which Anshun exemplifies, was expressed by Wigram VC in Henderson v Henderson at 115 and 319 as follows: "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." See Anshun at 598. In their joint judgment Gibbs CJ, Mason and Aicken JJ discussed the subsequent evolution of the principle and its ultimate emancipation from constraints imposed by common law pleading. At 602-3 their Honours acknowledged that there were a variety of circumstances why a party might justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. They referred to illustrations of such circumstances in Cromwell v County of Sac (1876) 94 US 24 Law Ed 195 at 199, where Field J, giving the judgment in the Supreme Court, said that various considerations, other than the actual merits, might govern a party in bringing forward grounds of recovery or defence in one action, which may not exist in another action upon a different demand, such as smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time. "A party acting upon considerations like these ought not to be precluded from contesting, in a subsequent action, other demands arising out of the same transaction." The Port of Melbourne Authority, in its later action against Anshun Pty Ltd for indemnity, which was stayed, adduced no evidence to show why it had failed to raise the indemnity issue in the injured worker's earlier action brought against URJ MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Sheller JA) 11 both the Authority and Anshun, in which each cross claimed for contribution against the other. In the present case Windeyer J rejected part of the evidence of explanation which Mr Currie proffered and seemed to regard "special circumstances" as irrelevant. His Honour's reference to Anshun at 613 is a reference to part of the judgment of Brennan J who expressed the opinion at 614 that Henderson v Henderson had not "hitherto been understood in this Court as applying to shut out a party from litigating a cause of action which has not merged in a judgment." However in the joint judgment in the passage to which I have referred their Honours made plain that there could be circumstances in which a party might justifiably refrain from litigating an issue in an early proceeding. Windeyer J said that he considered the claim fell clearly within the principles in Henderson v Henderson as expounded by the High Court in Anshun. He found that the procedure adopted in the 1990 trial made it unreasonable not to raise all grounds claimed for invalidity and exercised the powers given by Pt13 r5. But for one matter to which I will return, it would, I think, have been well within Windeyer J's discretion to conclude that, in the circumstances in which McLelland J ordered a separate hearing and Young J ordered that the summons be dismissed, Maronis was not justified in refraining in the 1990 proceedings from litigating any other ground upon which it wished to claim that the mortgage was void or invalid and should not now be permitted after four years to litigate those grounds in new proceedings. The only matter that concerns me arises out of what Windeyer J described as the other material going to Mr Currie's belief which was rejected. The evidence rejected was as follows: "42. I believed that the court would require, as the basis of granting an interim junction restraining the sale or providing other interlocutory relief, the giving of an undertaking as to damages and payment into court of moneys said to be owing under the Mortgage by Maronis. 43. I believed prior to both institution of Equity Division proceedings no. 2023 of 1990 on 29 March 1990 and during the period leading up to the hearing of the issues in that case before Mr Justice Rogers on 21 May 1990 that Maronis had available to it further grounds for asserting the invalidity of both the Mortgage and the Deed of Guarantee and Indemnity ('the Deed') dated 1 June 1990 of a more general nature along the lines of the claim now presently pleaded against Nippon Credit in these proceedings. I also believed prior to the institution of the Equity Division proceedings on 29 March 1990 that for such a case it would be unlikely that the court would order payment into court of the amount said to be owing under the Mortgage. 44. I believed that there were good grounds to suppose that Nippon Credit could not in law, rely on the Mortgage and the Deed because the giving of those securities was a fraud on Maronis, which Nippon Credit knew or ought to have known. I believed that such a case would have required Maronis to spend large amounts of money on the preparation of what I believed would be a lengthy and substantial legal case ranging factually over the events of some 18 months in both Australia and New Zealand and requiring the gathering of evidence from witnesses and sources in both New Zealand and Australia. On the other hand, I was of the belief that the s512 and s57(2)(b) points as ultimately argued before Mr Justice Rogers would be short, confined legal arguments upon assumed facts which might be considered urgently by the court and be relatively cheaply dealt with prior to the actual exercise of power of sale by Nippon Credit entering into 12 UNREPORTED JUDGMENTS a contract for sale and which, if Maronis was successful on the s512 point, would decisively and finally resolve the matter in Maronis' favour. 45. In March 1990, I believed that any claim by Maronis to challenge the security documentation of Nippon Credit would involve a large number of parties a lengthy discovery process, perhaps the introduction of expert evidence, and at the very least a very lengthy trial. The issues would have been complex and, I assumed, would have been contested. The final hearing would, I believed, have taken some weeks to conclude. 47. In March 1990 it was my belief that Maronis had very good prospects of succeeding in an action against those defendants (including Nippon Credit) in proceedings similar to those presently brought for breach of fiduciary duty. 49. Accordingly, in all those circumstances, I instructed Freehills to pursue the Equity Division proceedings which were ultimately heard by Mr Justice Rogers on 21 May 1990. When I gave these instructions I believed that if Maronis failed in these proceedings it would not be precluded in the future raising the general case referred to above although I believed there was some possibility that the first defendant might argue Maronis was precluded from pursuing the claim." In ruling on the admissibility of these paragraphs his Honour said: "Those paragraphs in effect are statements of his belief as to the process of conducting certain proceedings in the Equity Division relating to the mortgage in question; the defences available in a reasonable course of procedure in conducting those proceedings, together with the expense involved in conducting them in certain ways. It is I think perfectly clear that so far as most of the paragraphs in question are concerned, the belief was a belief which could only have come through the legal advice given by the solicitors for the mortgagor acting in the proceedings. It will ultimately be an objective test as to what was or was not reasonable and although the subjective view of a witness or in this case a director of the mortgagor company, may be relevant when coming to the final conclusion, it seems to me that it is quite irrelevant unless the basis of coming to that view is made out or made good in some way, rather than a pure statement of belief which on its face is of little value as it cannot be tested, even on the subjective tests, as to whether or not there was a basis for coming to that belief and if it cannot be tested than it seems to me that the subjective evidence is of no value. All that means at the present stage is that I would reject the paragraphs but give leave to supplement them by oral evidence. That would probably give rise to a question of whether or not the legal advice which no doubt for which I assume would then be referred to in evidence, was or was not admissible. Some parts of it may be and some parts of it may not be. It does not seem to me that all the contents of the advice would necessarily be admissible although that would not mean that the plaintiff/respondent could choose itself which parts should be excluded." Accordingly he rejected the parts to which I have referred. Counsel for Maronis then said that he did not seek to supplement the affidavit with oral evidence. Mr Currie was apparently available to give evidence. In my opinion the appropriate course would have been to admit the evidence of Mr Currie's belief, if it was relevant, which on its face it appeared to be. It was then for counsel to decide whether he wished to strengthen that evidence by leading further evidence of the advice, if any, upon which it was based and for Nippon's counsel to cross examine. However, counsel for Maronis was given the opportunity to lead the evidence orally which for unstated reasons he did not take up. In the circumstances I do not think that the rejection of the evidence can be URJ —MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Cole JA) 13 regarded as significant. It may be that counsel for Maronis decided not to lead further evidence so as not to expose the witness to cross examination which may have demonstrated or required some waiver of privilege in respect of legal professional advice furnished to Maronis. FORM OF ORDER Finally Maronis challenged the form of O.1 as made. This, it was said, went too far and beyond what his Honour intended. Maronis applied to amend its notice of appeal to raise this point and I would grant it leave to do so. While it is true that the order was made without objection by Maronis it strays beyond the scope of the 1990 and 1994 proceedings which were, relevantly, directed to the effectiveness and enforceability of the mortgage. Other questions may arise concerning, for example, the exercise of powers under the mortgage which for no good reason, beyond possibly some error in appreciating the width of the order made, Maronis may be denied the opportunity to contest. In my opinion the order should be amended to stay permanently the 1994 proceedings in so far as they concern the validity of the Cross Roads Mortgage. I propose the following orders: 1. Leave to the appellant to file and serve an amended notice of appeal adding the additional ground 18 and the additional orders sought 7 and 8 set out in the document filed in Court on and dated 13 December 1995. 2. Appeal allowed to the extent of setting aside O.1 entered on 21 October 1994 and substituting the following order: 1. As between the First Plaintiff and the First Defendant the proceedings be permanently stayed in so far as they concern the validity of the Cross Roads mortgage (as that term is defined in paral8(b) of the Statement of Claim); 3. Otherwise appeal dismissed and the orders entered on 21 October 1994 confirmed. 4. The appellant to pay the respondent's costs of appeal. Cole JA This is an appeal by Maronis Holdings Ltd (Maronis) against a decision by Windeyer J delivered 6 October 1994 in which h s Honour permanently stayed Maronis' claim against Nippon Credit Australia Ltd (Nippon), that claim being an allegation that a mortgage given by Maronis known as the "Cross Roads Mortgage" was "invalid and unenforceable", and an order for delivery up of the Cross Roads Mortgage. HISTORY OF THE PROCEEDINGS The relevant factual circumstances are as follows: 1. On 1 June 1989 Nippon and Girvan Australia (Girvan) entered into a facility agreement. Pursuant to that agreement Maronis, a company associated with the Girvan group, gave to Nippon a mortgage over certain property at Liverpool known as the "Cross Roads Mortgage". By 1990 there was default under the facility agreement which constituted default under the Cross Roads Mortgage. On 14 February 1990 Nippon gave notice to Maronis that it intended to exercise its power of sale.1 2. On 23 March 1990 the then solicitors for Maronis, Messrs Freehill Hollingdale and Page (Freehills) asserted that the Cross Roads Mortgage was void because Nippon was a foreign company not registered in New South Wales 1. Appeal Book, at 505 14 UNREPORTED JUDGMENTS and thus was not permitted to carry on business in that state. The voidness of the mortgage was said to flow from the provisions of s512 Companies (NSW) Code. The letter concluded: "The above is not to be construed as exhaustive and our client's rights to rely on other manners with regard to the purported mortgage are reserved."2 3. On 28 March 1990 Maronis lodged a caveat on its land the subject of the Cross Roads Mortgage claiming an interest in land and asserting: "Mortgage registered number Y434669 is void by reason of s512 of the Companies (NSW) Code."3 That caveat was registered on 29 March 1990. 4. On 29 March 1990 Maronis commenced proceedings against Nippon by way of summons seeking: "A declaration that the mortgage dated 1 June 1989 between the plaintiff and the defendant (the Mortgage') is void."4 5. On 12 April 1990 Messrs Allen Allen and Hemsley (Allens), the solicitors for Nippon, wrote to Freehills seeking an undertaking that the Equity proceedings will be "withdrawn immediately". 6. On 17 April 1990 Nippon made demand on Girvan for $16,138,345.05. On the same date it served a notice upon Maronis purporting to be a notice pursuant to s57(2)(b) Real Property Act (NSW). A further similar notice was served by Nippon on Maronis on 18 April 1990. 7. On 20 April 1990 Freehills wrote to Allens stating: "As soon as we receive the information and instructions we will: 1. Respond to the points raised in your letter; and 2. Raise additional points in support of our client's claims."5 This they did on 26 April 1990 stating: "4. The Equity Division Proceedings Having regard to the foregoing your request for the undertaking is declined. It is envisaged that the summons will be amended to seek relief based on further grounds."6 That was noted by Allens. 8. On 7 May 1990, in the equity proceedings commenced by Maronis, Nippon filed a cross-claim seeking: "An order that the caveat registered number Y942038 at the Lands Titles Office be removed from the Register."7 That was the caveat alleging that the mortgage was void in consequence of s512 Companies (NSW) Code. On the same date Nippon filed a notice of motion seeking the following order: "An order that there be a separate hearing on the question of whether if the mortgage between the plaintiff as mortgagor and the defendant as mortgagee registered number Y434669 at the Land Titles Office was executed by the plaintiff and registered while the plaintiff was in breach of s512(1) of the Companies (NSW) Code, the mortgage would not, for the that reason be void."8 The separate hearing was sought pursuant to Pt31 Supreme Court Rules. Appeal Book, at 354 Appeal Book, at 431 Appeal Book, at 28 Appeal Book, at 374 Appeal Book, at 132 Appeal Book, at 33 Appeal Book at 34 SIAM RYWN URJ —MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Cole JA) 15 9. On 11 May 1990 the motion for a separate hearing came before McLelland J. It is undisputed that: "Mr Robinson, then the junior counsel for Maronis, was asked by his Honour Mr Justice McLelland whether the s512 issue was the sole point under which Maronis relied to substantiate its allegation that the mortgage was void. Mr Robinson replied that it was."9 10. The parties agreed upon certain assumed facts and certain agreed facts for the purpose of the equity proceedings. On 21 May 1990 Maronis filed an amended summons in the equity proceedings against Nippon. It sought a declaration that the Cross Roads Mortgage was "void or unenforceable". In addition it challenged the validity of the two s57 notices seeking, first, a declaration that in the events which have happened "the defendant has no power to sell the subject land pursuant to the mortgage or under the Real Property Act (NSW) upon the expiration of thirty days from service of two alleged notices under s57(2)(b) of the Act dated 17 and 18 April 1990 respectively without compliance with such notices", and an injunction restraining the defendant from exercising the power of sale "until the defendant has complied with the provisions of the Real Property Act 1990 (NSW)". 11. On the same day, 21 May 1990, McLelland J made by consent certain orders. They were: "1. The Court orders that there be a separate hearing of the following questions based on the Assumed and Agreed Facts filed herewith (the Agreed Facts'). (it being noted that items 1-7 of the Agreed Facts are assumed solely for the purposes of such hearing): (a) whether the mortgage dated 1 June 1989 between the plaintiff and the defendant ("the mortgage") is void or unenforceable. (b)... 2. The Court notes that if the answer to paral (a) is in the negative the parties agree that the relief sought in paral of the summons should be dismissed and the defendant's claim should succeed."1!° Thus the court noted the agreement of the parties that if it be held that the mortgage was neither void nor unenforceable, not only would Maronis' summons be dismissed but the caveat lodged by it would be removed. There was thus agreement as to the final outcome of the litigation, including the right of Nippon to exercise its power of sale, depending upon the answer to the separate questions. 12. On the same day, 21 May 1990 the Pt31 hearing occurred before Rogers CJ Comm D. On 23 May 1990 his Honour delivered reasons rejecting Maronis' contention, first, "that the mortgage was void or unenforceable by reason of the non-compliance by the defendant with provisions of the Companies Code"!! and, second, finding that there had been compliance with s57(2)(b) of the Real Property Act (NSW). 13. In consequence, Young J on 25 May 1990 made orders in the equity proceedings in which his Honour dismissed the summons, ordered that the caveat be removed from the register, and ordered Maronis to pay Nippon's costs. His Honour 9. Appeal Book, at 26 10. Appeal Book, at 35 11. Appeal Book, at 125 16 UNREPORTED JUDGMENTS thus dismissed proceedings which sought a declaration that the Cross Roads Mortgage was "void or unenforceable". 14. Later in 1990 there were proceedings in New Zealand between Nippon, Girvan Corporation (New Zealand) Ltd and Maronis. 15. On 7 April 1994 Maronis and Girvan Corporation (New Zealand) Ltd (In liquidation) commenced further proceedings in equity against Nippon, four former directors of the Girvan Group and certain firms of solicitors. As against Nippon, the plaintiffs claimed that the securities, being the facility agreement of 1 June 1990 and associated documents were "invalid and unenforceable", a declaration that no monies were owed by the plaintiffs to Nippon and an order for delivery up of the securities including the Cross Roads Mortgage. Specifically, in relation to the Cross Roads Mortgage they asserted that Nippon knew or was put on inquiry regarding certain matters, and should have known when it received the securities, including the mortgage, that the provision of those securities was not for "any apparent commercial benefit to Maronis nor Girvan NZ", that the directors who arranged the giving of the securities were in a position of conflict, that there was no quorum authorising the giving of the securities, and that there was an absence of authority to give the securities referred to in the facility agreement, including the Cross Roads Mortgage. Thus it was contended that they were invalid and of no effect and should be set aside. 16. Pursuant to directions of Windeyer J Nippon filed "preliminary points" of defence regarding the Cross Roads Mortgage contending, in consequence of the earlier equity proceedings and the judgment therein that: "(d) Such rights as Maronis had to impugn the validity of the Cross Roads Mortgage have merged in the 1990 judgment. Consequently Maronis' claim against Nippon in these proceedings is barred. (e) Alternatively, the 1990 judgment necessarily decided that the Cross Roads Mortgage is valid. Consequently Maronis is unable as against Nippon to contend to the contrary. (f) Alternatively, Maronis ought to have raised the claim made against Nippon in these proceedings in the 1990 proceedings. In particular, Maronis' claim in these proceedings against Nippon would, if successful, result in a judgment conflicting with the 1990 judgment. Consequently, Maronis' claim in these proceedings ought to be struck or permanently stayed.!2 17. On 18 April 1994 Nippon filed a second amended notice of motion in the second equity proceedings seeking: "1. An order that as between the first plaintiff (Maronis) and the first defendant (Nippon) the proceedings in so far as they concern the Cross Roads Mortgage (as that term is defined in paral8(b) of the statement of claim be dismissed. 2. In the alternative, an order that as between the first plaintiff and the first defendant the proceedings in so far as they concern the Cross Roads Mortgage be struck out or, in the alternative, permanently stayed. The motion was heard by Windeyer J on 18 August 1994. 18. On 13 October 1994 Windeyer J ordered: "As between the first plaintiff (Maronis) and the first defendant (Nippon) the proceedings be permanently stayed in so far as they concern the Cross Roads Mortgage (as that term is defined in paral 8(b) of the Statement of claim)." From that judgment leave was sought to appeal and the application for leave stood over to the hearing of this appeal. 12. Appeal Book, at 21-22 URJ —MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Cole JA) 17 THE REASONS OF WINDEYER J His Honour held: However it is I think always open to parties to agree upon issues and the results of findings upon those issues and to be bound by such agreements making it an abuse to go behind such agreement so that the cause of action which merges in judgment is the claim for relief made in the summons. The basis of res judicata, and for that matter, the extended estoppel based on Henderson v Henderson [1843] 3 Hare 100; 67 ER 313, is the public interest in bringing litigation to a final conclusion."!3 And later: "Tn many instances the determination of a preliminary issue does no more than determine what would for a party be a knock out point if successful. The s512 argument if upheld, would have been such a point for Maronis if the assumed fact were established the s57 point of course had nothing to do with validity but went on to exercise of power assuming the mortgage was valid. Thus if the s512 point were treated as a knock out point which could determine matters from a Maronis new point but failed so to do then if there were anything else left to be argued one would expect that upon the questions in the separate issues being answered the decision would be recorded and the summons would be stood over for further hearing. Leaving aside the agreement, the procedure adopted was appropriate for that course to be taken so that other matters relating to validity of the mortgage could be determined in due course on appropriate further evidence if there were to be any. But that course was not taken; orders dismissing the proceedings were made by consent and in accordance with the agreement. This it seems to me implies that no further question of validity remained and is in accordance with the procedure available under Pt31 15(2) and r6. If for some reason it was alleged the final orders were obtained by mistake then action could possibly be taken to set those orders aside but while they remain entered upon the record they are a final order upon which a plea of res judicata can be made if subsequent proceedings are brought between the same parties on the same subject matter or cause of action. The claim for summary dismissal on the ground that a plea of res judicata is certain to succeed raises the difficult question as to what was the *cause of action" which merged in the dismissal order. As will be clear from what I have said it is my view at this stage that the cause of action was the claim as to invalidity, that being the basis of the consent orders, and not the claim as to invalidity on a particular ground. In other words the cause of the action was the claim of right to have the mortgage set aside, that claim having merged in the order for dismissal. However the principles on which summary disposal applications are to be dealt with make it clear that summary relief can be given only in the clearest cases and, although it is difficult to see that much further argument would or could be advanced on a final determination, were res judicata in the strict sense the only estoppel defence raised, I would not have been satisfied it would certainly succeed because here are differing formulations of what is meant by the cause of action; see Anshun at 610; Boles v Esanda Finance Corporation Ltd (1989) 18 NRWLR 666 at 672."14 His Honour then dealt with what he described as "Anshun estoppel". His Honour said: 13. Appeal Book, at 522 14. Appeal Book, at 22-24 18 UNREPORTED JUDGMENTS The procedure adopted in earlier action to some extent makes it different from others where res judicata and the extended Henderson estoppel principle have been considered. Nevertheless the position is clear. At the conclusion of the hearing on the separate points - and leaving aside the agreement in para2 of the short minutes of order by McLelland J on 21 July - the plaintiff had two choices: it could either have the decision recorded and estimate the action raising any other points available to it to set aside the mortgage; or it could allow the proceedings to be concluded by order bringing to an end its opportunities to attack the validity of the mortgage. It chose the latter. On any basis it is perfectly clear that, had there been no agreement, if any further matter were to be raised there was on opportunity to raise it in the then extant proceedings. I consider it clear it ought to have been so raised; and it would be unreasonable to allow it to be raised in subsequent proceedings brought 4 years later. Any application to withdraw from the agreement and argue further grounds for invalidity should in the same way have been made after the separate issues were determined. This has little to do with prejudice; it is to do with the the requirement of certainty and the ending of legislation. If I am wrong on res judicata then I consider the claim falls clearly within the principles in Henderson v Henderson as expounded by the High Court of Australia in Post of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. If this involves an exercise of discretion (see Boles at 673) then in my view the procedure adopted at trial would require a finding it was unreasonable not to raise all grounds claimed for invalidity so that I consider this is an appropriate matter in which to exercise the powers given by Pt15 rS. If not properly characterised as an abuse of power the claim is vexatious."!5 REJECTION OF EVIDENCE Windeyer J rejected certain evidence of a Mr Currie sought to be led on behalf of Maronis. That which was rejected was portion of para42 and para45 and the whole of para43, para44, para47 and para49 of his affidavit.!© The evidence rejected related to Mr Currie's belief concerning the approach the court might take regarding payment into court of the mortgage debt, the duration and cost of the trial and the likelihood of success of the s512 and s57 points. Mr Currie was not a lawyer: the subject matter of his belief was thus based on legal advice. Windeyer J rejected the material upon the basis that the question whether it was reasonable for Maronis not to have raised the additional challenges to the validity of the mortgage in the first equity proceedings was to be determined by reference to an objective test. His Honour was of the view that, whilst Mr Currie's views may have been of peripheral assistance unless substantiated by the legal advice upon which Mr Currie's beliefs were expressed, the evidence of Mr Currie would be of little, if any, weight. Accordingly the evidence was rejected but leave was given to supplement Mr Currie's evidence by oral evidence which, as his Honour indicated, may give rise to questions of admissibility of the legal advice upon which it was based. Maronis chose not to lead oral evidence from Mr Currie on these matters or to tender the legal advice upon which the rejected paragraphs were presumably based. In my opinion Windeyer J was correct in his view that the test of whether it was reasonable for Maronis not to raise the further contentions regarding the validity of the Cross Roads Mortgage in the first equity proceedings is to be 15. Appeal Book, at 525-526 16. Appeal Book, at 525-526 URJ —MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Cole JA) 19 determined by an objective test.!7 The reason why Maronis may have adopted the course it did of challenging validity on one basis only may have been relevant to the decision on reasonableness!8, but Mr Currie's unsubstantiated and untested beliefs were found by his Honour to be "subjective evidence of no value".!9 That view was correct in the circumstances that a notice to produce the legal advice upon which Mr Currie's views were apparently based had been served but legal professional privilege had been claimed. Being of that view the evidence was rejected. No endeavour was made to lead from Mr Currie oral evidence of such reasons which, assuming they were based on legal advice, would have raised issues concerning the disclosure of legal advice.2° No doubt the decision not to lead such evidence was one consciously taken. It follows, in my view, that whether the affidavit evidence was properly rejected or not, no complaint can now properly be made in consequence of failure to accept the invitation to lead oral evidence on the same subject matter. THE APPEAL In my opinion this appeal does not turn on any fine niceties of legal distinction. Since Henderson v Henderson in 1843?! it has been accepted that: "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, inadvertence, 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." The High Court adopted and discussed those concepts in Anshun.22 Gibbs CJ, Mason and Aicken JJ expressed the concepts in Henderson in the following terms: "Tn this situation we would prefer to say that there will be no estoppel unless it appears that the matter replied 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 plaintiff's 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 one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue 17. O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 at 615, 633. 18. Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 603. 19. Appeal Book, at 430. 20. Benecke v National Australia Bank (1993) 35 NSWLR 110 21. [1843] 3 Hare at 115, 67 ER at 319. 22. Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 598. 20 UNREPORTED JUDGMENTS in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few."23 Here the issue raised in the first equity proceedings was whether the Cross Roads mortgage was void, and later void or unenforceable. There may be various bases for such a contention. Initially only the s512 point was raised with indications being given that additional matters would be raised. However, at the time when McLelland J was considering whether to order a separate Pt31 hearing on the question of validity, Maronis apparently decided that it would raise only the s512 point so far as validity was concerned. Mr Robinson made that clear to McLelland J. The reason why Maronis took that position appears clearly from the evidence of Mr Currie; neither Maronis nor its associated Girvan companies had the funds to engage in a wide, lengthy and expensive legal contest.24 It chose to rely on that, and the additional argument regarding non-compliance with s57 Real Property Act. It not only informed the court that in its challenge to the validity of the mortgage only one point was raised but it agreed to short minutes making clear that its challenge to validity would fail if its contentions of invalidity based on non-compliance with s512 Companies (NSW) Code failed. It agreed that in the event of such failure, its caveat would be removed thus implicitly accepting the right of Nippon to exercise its power of sale. Any such exercise is consistent only with the validity of the mortgage. Maronis had the right and indeed the obligation, as a plaintiff seeking a declaration of voidness and unenforceability at the time of the first equity proceedings in 1990, to advance all and any bases upon which it contended that the Cross Roads mortgage was void or unenforceable. It elected, deliberately, and not through any misadventure or mistake, to advance one ground only. That ground failed resulting in dismissal of the summons which had the effect, as between Maronis and Nippon, of confirming by the judgment of dismissal of the challenge to validity and consequential removal of the caveat preventing exercise of mortgage rights, the validity of the mortgage.25 The substance of the failed action was a claim of invalidity: that claim merged in the judgment which confirmed validity.2 Maronis may not now bring proceedings seeking a conflicting judgment. If Maronis is later to be permitted to raise additional challenges to the validity of the Cross Roads Mortgage there is the prospect of contradictory judgments to which Gibbs CJ, Mason and Aicken JJ referred in Anshun. Their Honours there said: "The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which 23. (1981) 147 CLR 589 at 602-603 24. Evidence of Mr Currie; Appeal Book, at 189-192; para41, para42, para45, para46 and para48. 25. Compare Coles v Woods and Anor (1981) 1 NSWLR 723; A Hudson and Pty Ltd v Legal and General Life of Australia Ltd (1988) 1 NSWLR 701. 26. (1981) 147 CLR 589 at 610, 613 Brennan J, 603 per Gibbs CJ, Mason and Aicken JJ. URJ —MARONIS HOLDING LTD v NIPPON CREDIT AUSTRALIA LTD (Cole JA) 21 are contradictory, though they may not be pronounced in the cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction."27 The more so where Maronis is a plaintiff seeking a declaration of voidness and unenforceability. The dismissal of the first summons indicates that the mortgage is valid. Now a judgment is sought by the same plaintiff that it is invalid and unenforceable. Such judgments would be contradictory. In terms of Henderson v Henderson, Maronis having determined to rely upon only one ground of asserted invalidity which failed, the Court will not now permit it to raise matters which might have been previously advanced. Res judicata applies. Here applicable which would deflect the general principle there are no special circumstances applicable which would deflect the general principle - the decision not to advance additional grounds of contest was deliberate. Indeed, there was specific agreement to the failure to the challenge to validity if the one ground raised failed. That was the effect of the agreed short minutes of order before McLelland J. In those circumstances it would be unreasonable later to permit Maronis to raise additional grounds of challenge to validity of the mortgage. In my opinion Maronis having adopted one position before McLelland J and Young J in 1990 should not be permitted in 1994 to reverse that position. I see no substance in the contention that the order made by Windeyer J was too wide. The form of order was agreed by the parties as being consistent with his Honour's reasons.28 Leave to add a general appeal to challenge the agreed form of order should be refused. The appeal should be dismissed with costs. 1. Leave to the appellant to file and serve an amended notice of appeal adding the additional ground 18 and the additional orders sought 7 and 8 set out in the document filed in Court on and dated 13 December 1995. 2. Appeal allowed to the extent of setting aside O.1 entered on 21 October 1994 and substituting the following order: 1. As between the First Plaintiff and the First Defendant the proceedings be permanently stayed in so far as they concern the validity of the Cross Roads mortgage (as that term is defined in para 18(b) of the Statement of Claim); 3. Otherwise appeal dismissed and the orders entered on 21 October 1994 confirmed. 4. The appellant to pay the respondent's costs of appeal. Counsel for the Appellant: AR Emmett QC, JE Marshall Solicitors for the Appellant: Henry Davis York Counsel for the Respondent: FM Douglas QC, TGL Parker Solicitors for the Respondent: Allen, Allen and Hemsley 27. (1981) 147 CLR 589 at 603-604 28. Appeal Book, at 527-528