New South Wales Court of Appeal CITATION : Pollnow v Armstrong [2000] NSWCA 245 revised - 6/11/2000 FILE NUMBER(S) : CA 40064/99 HEARING DATE(S) : 28 July 2000 JUDGMENT DATE : 31 August 2000 PARTIES : Errol Hugh Pollnow v Frank John Armstrong, Charles James Buckles, Gordon Raymond Engele, Neville Murray Gentle, Raymond John Heiniger, John Sidney Herman, Robin Reece Jones, Neville Lockett, Peter Ferguson Martin, Bruce Valentine Mickan, Barry Phillip O'Regan, Geoffrey Harold Pollock, Lake Village Apartments Pty Limited, Butler Pollnow Pty Limited. JUDGMENT OF : Priestley JA at 1; Meagher JA at 4; Sheller JA at 18 LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT 3702/98 FILE NUMBER(S) : LOWER COURT Cohen J JUDICIAL OFFICER : COUNSEL : Appellant: J J Archer Respondents: M. Einfield QC/H. Packer Appellant: Smits Leslie SOLICITORS : Respondents 1-13: Solomon Garland Partners Respondents 14: Gayle Meredith & Associates. CATCHWORDS : Partnership - Real estate development - Units held in trust - beneficiary - res judicata - Arnold v Westminister Bank Pty Limited distinguished. CASES CITED: Arnold v National Westminster Bank Pty Limited [1991] 2 AC 93, Tiufino v Warland [2000] NSWCA 110. DECISION : Appeal dismissed with costs. - 1 - - 7 - PARTNERSHIP - REAL ESTATE DEVELOPMENT - UNITS HELD IN TRUST - BENEFICIARY - RES JUJDICATA - ARNOLD v WESTMINSTER BANK PTY LIMITED DISTINGUISHED. Facts: The present appellant in prior litigation in the Equity Division before McClelland CJ in Equity, claimed units in "Lake Village Apartments Pty Limited" were held in trust for him and that this Company held 15-25% of the units in the partnership "Beauvest Investment Partnership". Mr Pollnow alleged that the trust was express, arising from a Deed of Nomination and constructive. His Honour disallowed an express trust and found a constructive trust. On appeal, the Court of Appeal found an express trust and disallowed a constructive trust, and then found the allegation of trust failed because the Deed of Nomination upon which it was based had not been stamped. Mr Pollnow then initiated further proceedings in the Equity Division claiming relevantly the same relief. This litigation was dismissed by Cohen J and Mr Pollnow appeals. Held: By Meagher JA, Priestley, Sheller JJA agreeing: 1. The parties were different in each case but not relevantly so: In each the issue was whether the units of Lake Village Apartment Pty Limited in the Beauvest Investment Partnership were held for Mr Pollnow. As a result the proper parties were the same in each case. 2. Thus, one can say of the later proceedings that they involve exactly the same claim over the same property by the same plaintiff against the same defendant as in the earlier cases. This is a classic situation for the application of res judicata, as found by Cohen J. 3. The doctrine of res judicata is concerned with results not reasons. The failure of the trust in previous proceedings prevents further proceedings based on the same allegation regardless of reasons. 4. The possible exception as stated in Arnold v Westminster Bank Pty Limited [1991] 2AC 93 distinguished: since the present case is true res judicata it is not appropriate to discuss the situation if it were merely issue estoppel. 5. For the purposes of res judicata one is restricted to the examination of the plaintiff's pleadings and the Court's orders: see Handley JA in Tiufino v Warland [2000] NSWCA 110. Orders: 1. Appeal dismissed with costs. THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA: 40064/99 PRIESTLEY JA MEAGHER JA SHELLER JA Thursday, 31 August 2000 POLLNOW v ARMSTRONG & ORS JUDGMENT 1 PRIESTLEY JA: I agree with Meagher JA's opinion, which I have had the benefit of reading in draft. 2 In regard to par 204 of the 3rd edition of Spencer Bower on Res Judicata, on the second paragraph of which counsel for the appellant relied (and which is set out in Meagher JA's reasons), I think counsel's reliance on it was due to a misunderstanding. The passages preceding par 204, and the cases cited in the second paragraph of par 204 itself for that matter, make it plain that the second paragraph is dealing with that branch of res judicata called issue estoppel, and not the main and original doctrine of res judicata, now frequently called in England cause of action estoppel. The two branches are substantially different and confusion between them would be lessened if the English habit of describing issue estoppel as a branch of res judicata were abandoned. At all events, none of the cases cited in par 204 gives the appellant in the present case any basis for escaping from the established rules of res judicata (properly so called and distinct from issue estoppel) referred to by Meagher JA in his reasons. 3 In my opinion the appeal should be dismissed with costs. 4 MEAGHER JA: There was at relevant times, and for all I know still is, a partnership called the "Beauvest Investment Partnership". The business of the partnership was the carrying on of certain real estate development. Various persons and companies had different percentage units in that partnership. One such company was a company called "Lake Village Apartments Pty Limited". It held 15-25% of the units. The plaintiff, Mr (or Dr.) Pollnow, claimed that some of that 15-25% was held on trust for him. His allegations varied: on some occasions he claimed that half of the 15.25% (or 7.626% of the whole) were held on trust, on other occasions he claimed that 4/9ths of them ( or 6.782% of the whole) were held on trust for him. 5 In proceedings in the Equity Division of this Court No. 3426 of 1983 in which he was a cross-claimant he claimed that one or other of the percentages I have mentioned was held in trust for him. Those proceedings were heard and determined by McLelland J at first instance, and by this Court on appeal. In those proceedings Mr Pollnow propounded his alleged trust on two bases, an express trust and a constructive trust. The express trust alleged was set out in a document which has been referred to as the Deed of Nomination. His Honour rejected the former alleged basis but allowed the latter. The Court of Appeal upheld McLelland J on the former, but over-ruled him on the latter. In the result, the Court held that the allegation of trust failed. I might add that the reason why the former alleged trust failed was because the Deed of Nomination on which it was based had not been stamped. However, in my view, it does not matter for any relevant purpose on what ground Mr Pollnow failed; that he failed is all that matters. 6 Now, Mr Pollnow has initiated further proceedings in the Equity Division of the Court (No 3702 of 1998) claiming (insofar as is relevant) exactly the same relief against Lake Village Apartments Pty Limited as was claimed in the earlier proceedings. It is hardly surprising that Cohen J dismissed those proceedings, and the present appeal is an appeal from Cohen J's decision. For myself, I agree with every word of Cohen J's reasons for judgment and would be happy to adopt them as my own. 7 Before his Honour, and to some extent in the written submissions before us, but not in the oral arguments before us, reliance was placed on the fact that the parties were different in each case. That is so, but not relevantly so. Mr Pollnow's cross-claim in the earlier proceedings had nine cross-defendants, each of them a limited company. One can understand that, because nine separate trusts were alleged, one against each company. Thus, each company was a necessary and a proper defendant to each claim. But not to the other eight claims. In the later proceedings there were fourteen defendants. The first thirteen defendants (including Lake Village Apartments Pty Limited were members of the partnership. Why this was done I cannot imagine. A trust was alleged against the thirteenth defendant, Lake Village Apartments Pty Limited, and against nobody else. It was the only proper or necessary party. If one alleges that a parcel of land is held on trust for one, the action lies against the legal owner of the land; one has no business adding all the other lots in the sub-division as additional defendants. Why the fourteenth defendant, Butler Pollnow Pty Limited was joined, it is impossible to speculate. It appears to have nothing to do with Lake Village Apartment Pty Limited, nor is it a member of the partnership. The issue in each proceeding was whether the units of Lake Village Apartments Pty Limited in the Beauvest Investment Partnership were held in trust for Mr Pollnow or not, and the proper parties were the same in each case. 8 Thus, one can say of the later proceedings that they involve exactly the same claim over the same property by the same plaintiff against the same defendant as in the earlier cases. This is, one would have thought, and as Cohen J held, a classic situation for the application of the doctrine of res judicata. 9 Learned counsel for the appellant, Mr Archer, whilst conceding that at first impression his progress was blocked by the obstacles of res judicata, submitted that there were two ways in which he could escape that doctrine: (i) there never has been a judicial finding on whether the Deed of Nomination was or was not effective to establish the trust propounded by the cross-claimant in the earlier proceedings, and (ii) there was a new Deed, not formerly available, called in these proceedings "the Crawley Deed", which proved the existence of the trust alleged in both proceedings. As to (i), it is based upon a false premise. The doctrine of res judicata is concerned with results not reasons. Whether the trust failed because oral evidence to the contrary was believed, or because the deed relied on had been revoked, or because it related to different property from that claimed, or because it could not be proved (eg because Stamp Duty had not been paid in New South Wales), simply does not matter: if the trust alleged is found not to exist, the doctrine of res judicata will prevent further proceedings based on the same allegation. As to (ii), the same considerations which prevent proposition (i) from prevailing would also apply to (ii). However, there is a further feature of (ii) which should be noted. It stems from a quaint doctrine suggested by Lord Keith in Arnold v National Westminster Bank Pty Limited [1991] 2 AC 93 at 104, who, stating the conventional law on res judicata at 104, said: "It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. Cause of action estoppel arises where the cause of action in a later proceeding is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the Law of England, permit the latter to be re-opened." 10 But then added a proviso about issue estoppel at 108: "It is to be noted that there appears to be no decided case where issue estoppel has been held not to apply by reason that in the later proceedings a party has brought forward further relevant material which he could not by reasonable diligence have adduced in the earlier. There is, however, an impressive array of dicta of high authority in favour of the possibility of this. In my opinion, your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstances that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings." 11 Since the present case involves a true res judicata, there is not much point in discussing what the situation would be if it were merely issue estoppel. No suggestion of "fraud or collusion" was alleged to exist in the present case. 12 There has been, in decided cases, no case which would apply the supposed exception involving the appearance of further relevant material not previously discoverable by reasonable diligence to a case of true res judicata. However, there is some, but limited, textbook authority for that proposition. Thus Handley JA, in the third edition of Spencer Bower on estoppel, says at para 204: "It was formerly considered that the subject matter of a decision for the purposes of res judicata could only be ascertained from the formal judgment or order and the court could not examine "what was said by the judges". The previous author was in some doubt but preferred the view that the court's reasons could be considered. There were then many cases favouring the broader view. Since then the law has been settled in favour of the broader view. In R v Humphreys [1977] AC 1 at 41 Lord Hailsham said: "The court will inquire into the realities, and not mere technicalities", and Rogers v R (1994) 181 CLR 251 at 263 Brennan J said that the court could look at "any material that shows what issues were raised and decided". The point now seems to be assumed. Thus, in Thrasyvoulou [1990]2 AC 273, the House considered reports of planning inspectors. In Arnold [1991] 2 AC 93, it held that issue estoppel was excluded because of the special circumstances but that question could not be investigated if the court were confined to the pleadings and the order." 13 In the circumstances, and in the absence of any binding authority requiring the application of Arnold's Case to res judicata, I am of the view that for the purposes of res judicata one is restricted to the examination of the plaintiff's pleadings and the Court's orders. See Handley JA in Tiufino v Warland [2000] NSWCA 110, unreported. 14 Not that, even if the doctrine did apply to res judicata, it would necessarily apply in the present circumstances. I think it would not. 15 For the reasons given by Cohen J, I do not think the appellant proved that the evidence in question (the "Crawley Deed") could not have been discovered with reasonable diligence in the earlier litigation. 16 To add still further to the appellant's problems, in my view the two trust Deeds, the Deed of Nomination and the Crawley Deed, are hardly consistent with each other. 17 In my view, the appeal should be dismissed with costs. 18 SHELLER JA: I agree with Meagher JA. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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