New South Wales Supreme Court CITATION : Lee & Ors v Keddie & Ors [2009] NSWSC 777 HEARING DATE(S) : 15.07.09 JUDGMENT DATE : 7 August 2009 JUDGMENT OF : Nicholas J DECISION : par 34 CATCHWORDS : ESTOPPEL – issue estoppel – whether order for dismissal of earlier proceedings precluded defendant raising similar issues in later proceedings for defamation – relevance of forensic context in which order made – general principles considered LEGISLATION CITED : Civil Procedure Act 2005 Defamation Act 2005 CATEGORY : Principal judgment Isaacs v Ocean Accident and Guarantee Corporation Ltd (1957) 58 SR (NSW) 69 McCann v Switzerland Insurance Australia Ltd (Allen's case) [2000] HCA 65; (2000) 203 CLR 579 CASES CITED : Minero Pty Ltd v Redero Pty Ltd (Supreme Court of New South Wales, Santow J, 29 July 1998 Unreported; BC 9803546) Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Taylor v Dexta Corporation Ltd & Ors [2006] NSWCA 310; (2006) 14 ANZ Insurance Cases 61-712 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 Siu Sheng Lee – first plaintiff Hong Mei Li – second plaintiff PARTIES : Hong Liu – third plaintiff Russell Keddie – first defendant Scott Roulstone – second defendant Tony Barakat – third defendant FILE NUMBER(S) : SC 20366/07 COUNSEL : J Hmelnitsky - plaintiffs R Glasson - defendants SOLICITORS : Horowitz & Bilinsky - plaintiffs Verekers Lawyers - defendants IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST Nicholas J 7 August 2009 20366/07 Lee & Ors v Keddie & Ors JUDGMENT 1 His Honour: By notice of motion filed 15 July 2009 the plaintiffs seek an order that some particulars of justification in the amended defence filed 20 October 2008 be struck out. The order is sought on the ground that the factual and legal issues raised in the particulars are issues which, in effect, were determined by the Court in earlier proceedings, so that the defendants are estopped from raising them in the present proceedings. Background 2 The defendants practise in partnership as solicitors under the name "Keddies The Insurance Law Specialists". From about 1999 to 23 October 2006 the first plaintiff was employed by the defendants to provide various services to them, including marketing and advertising services. From about 1999 to 23 October 2006 the second plaintiff was employed by the defendants to provide interpreting services for clients. From about May 2004 to 23 October 2006 the third defendant was employed by the defendants as a legal clerk. 3 On 7 December 2006 the defendants commenced proceedings no. 6202/06 in this Court against the plaintiffs and Margiottas Solicitors (the earlier proceedings). By statement of claim filed 23 February 2007 the defendants claimed against the plaintiffs a declaration that each had acted in breach of his or her fiduciary duties to the defendants, and consequential relief including damages. 4 The pleading included allegations that the plaintiffs, whilst employees and agents, had owed contractual and fiduciary duties to the defendants which included an equitable obligation of confidentiality, particularly relating to information in respect of the defendants' clients. Breach of duty was alleged in the following terms: "25. Since about mid to late October 2006 each of Mr Lee, Ms Hong and Helena have used the Plaintiffs' Confidential Information: (a) to identify particular clients of the Plaintiffs to target; (b) targeted those clients; and (c) have arranged for the files of those clients to be transferred from the Plaintiffs to the Fourth Defendant [Margiottas Solicitors]." 5 On about 25 October 2006 the defendants published the matter complained of in the Chinese language to members of the Chinese community. 6 Pursuant to a deed of release entered into by the parties on 17 August 2007 (the deed), the earlier proceedings were resolved by consent. On 22 August 2007 the Court, by consent, ordered that the statement of claim be dismissed, and each party to pay his or her own costs. As its proper construction is an issue under the present application, the details of the deed are referred to later in these reasons. 7 By statement of claim filed 24 October 2007 the plaintiffs commenced these proceedings for the recovery of damages for defamation arising from the publication of the matter complained of. Each plaintiff relies upon the same imputations as pleaded in pars 3, 4 and 5 of the further amended statement of claim filed 5 June 2008, as follows: "3(i) The first plaintiff was so unfriendly and immoral that he was sacked as an employee of the defendants. (ii) The first plaintiff was so unfriendly and immoral that he was unfit to be employed by a law firm. (iii) The first plaintiff was so unfriendly and immoral that he was unfit to provide an interpreting service. (iv) The first plaintiff was so unethical that he was sacked as an employee of the defendants. (v) The first plaintiff was so unethical that he was unfit to be employed by a law firm. (vi) The first plaintiff was so unethical that he was unfit to provide an interpreting service." 8 Each plaintiff claims aggravated damages. As a particular in support of the claim, it is pleaded (par 9(a)): "… that their hurt to feelings has been increased by: (i) their knowledge of the falsity of the matter complained of;" 9 By their amended defence the defendants plead defences of justification, common law qualified privilege, and statutory qualified privilege. 10 Section 25 Defamation Act 2005 provides that it is a defence to the publication of defamatory matter if the defendant proves that the defamatory imputations carried by the matter complained of are substantially true. 11 The plaintiffs challenge some of the particulars relied upon in support of the defence of justification included in annexure A to the amended defence. Relevantly, the particulars are those pleaded in pars 1-5, 7-10 as against the first plaintiff; pars 23-30 as against the second plaintiff; and pars 38-47 as against the third plaintiff. According to the pleading these particulars are in support of the allegation that, in breach of the duty of confidence, each plaintiff used the defendants' client lists for the purpose of encouraging those clients to dispense with the defendants' services, and to procure the transfer of their files to Margiottas Solicitors, and to enable Margiottas Solicitors to solicit their retainer in place of the defendants. In short, it was put that the particulars in each case allege that in breach of the plaintiffs' equitable and common law obligations of confidence they misused the defendants' confidential information in respect of Chinese speaking clients, and attempted to steal them away for Margiottas Solicitors. As a matter of convenience the application proceeded with regard to the particulars referable to the first plaintiff. 12 For the plaintiffs it was submitted that, with regard to substance over form, the particulars of truth raise issues which are the same as those which were dismissed in the earlier proceedings, in which the essential claim was that each plaintiff had breached contractual and fiduciary duties in relation to confidential client information. It was put that by the order which dismissed the earlier proceedings, taken in its forensic context, an issue estoppel arose which precludes the defendants from raising these claims in these defamation proceedings. 13 It was accepted that the deed provided the forensic context in which the scope or effect of the order is to be determined. The plaintiffs argued that, with reference to the terms of the deed, the intended effect of the order was to put an end to the earlier proceedings and any other dispute between the parties involving the same issues, once and for all, just as if the earlier proceedings had been dismissed after a hearing on the merits. Thus it was argued that the doctrine of issue estoppel applied in circumstances where, as here, the defendants seek to raise under a defence to a defamation action the same issues which had been disposed of by the dismissal of the earlier proceedings pursuant to the deed. 14 For the defendants it was submitted that issue estoppel cannot arise as the issues involved in the earlier proceedings and in these proceedings are different. It was explained that in the earlier proceedings facts were alleged to support claims for relief for breach of confidence including injunctions, delivery up, and damages whereas the challenged particulars allege facts in support of defences of truth to imputations in a defamation action. 15 As for the deed, the defendants submitted that, upon its proper construction, particularly cl 5, it manifests the parties' intention that the defamation proceedings be excluded from its application with the consequence that the dismissal could not result in any issue estoppel in respect of the issues raised in them. 16 The crucial question in this application is whether the effect of the dismissal of the earlier proceedings raises an issue estoppel whereby the defendants are precluded from agitating the issues foreshadowed by the challenged particulars. 17 The effect of dismissal of proceedings is provided for by s 91(1) Civil Procedure Act 2005 as follows: "91 Effect of Dismissal of Proceedings (1) Dismissal of: (a) any proceedings, either generally or in relation to any cause of action, or (b) the whole or any part of a claim for relief in any proceedings, does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings or claiming the same relief in fresh proceedings." 18 As the right or ability to bring fresh proceedings is qualified, in each case attention must be given to the terms on which the order was made. As Santow J explained in Minero Pty Ltd v Redero Pty Ltd (Supreme Court of New South Wales, 29 July 1998 Unreported; BC 9803546 (p 18)) whether a dismissal order precludes the institution of fresh proceedings will depend on the intention of the parties manifested by the order made considered in its forensic context. He said (p 19): "That consequence will also depend on determining from that same forensic context precisely what questions were concluded by those earlier proceedings. Thus Spencer Bower, Turner and Handley at 39-40 concludes that resort may be had to the material before the court to the extent there is any. This is in order to determine what the parties recognised was the subject matter of their litigation and was fundamental to the judgment or order made: "Though consent judgments and orders are decisions and their operative parts binding, it may not be clear what questions were concluded. The court will examine the available evidence to ascertain the matters in dispute. Any issue which the parties recognised was the subject of the litigation and was fundamental to the judgment or order will be conclusively determined. Where, however, there are no such materials neither party is estopped from disputing anything but the actual judgment or order. The proper approach to determining the scope of a consent judgment was stated by Lord Herschell LC: '... ... a judgment by consent is intended to put a stop to litigation between the parties, just as much as is a judgment which results from the decision of the court after the matter has been fought out to the end. And I think it would be very mischievous if one were not to give a fair and reasonable interpretation to such judgments and were to allow questions that were really involved in the action to be fought over again in a subsequent action'." 19 In Isaacs v Ocean Accident and Guarantee Corporation Ltd (1957) 58 SR (NSW) 69 at 75, Street CJ and Roper CJ in Eq said: "It is clear that the mere fact that the judgment is by consent does not detract from its conclusive effect upon the issues determined by it: Re South American and Mexican Co; Ex parte Bank of England . But a judgment operates by way of estoppel only as to those matters which are necessarily decided by it. (Cf Blair v Curran ; Jackson v Goldsmith .) 'Though consent judgments and orders are undoubtedly in every case decisions in the sense that the actual mandatory or prohibitive parts of the judgment or order are conclusively binding upon … the parties … it may often be a matter of legitimate doubt and debate as to what, if any, particular questions or issues of right, title, or liability were, expressly or impliedly, the subject of the consent, and of the decision. For this purpose, as for all other purposes connected with the ascertainment of the subject-matter of a decision, the court will closely examine all such evidence, if any, as is available and admissible, and, by the aid of such materials, will ascertain whether any and what adjudication of matters in dispute was expressed, or necessarily involved, in the actual decision assented to' (Spencer Bower on Res Judicata , p 24, para 34). Again, at p 114, para 174, the learned author says: 'In the case of judgments and orders by consent … it is absolutely essential to refer to the pleadings or affidavits of the parties, if the judgment or order is in a naked and general form, in order to ascertain what, if any, decision of particular questions or issues was impliedly consented or submitted to by the party against whom such consent … judgment or order was made'." 20 It was common ground that the relevant forensic context for ascertaining the intended effect of the dismissal order included the deed, and the fact that notice had been given of potential proceedings arising out of the publication of the matter complained of. 21 Relevantly, the deed includes the following: "RECITALS A The Plaintiffs have been in dispute with the Defendants generally and in proceedings number 6202 of 2006 in the Supreme Court of NSW ("the proceedings"). B Helena, and Bai Yi have provided interpreting services to clients of the Plaintiffs and claim payment of fees for such services. C The Defendants have disputed the claim made by the Plaintiffs in the proceedings. D The parties have agreed to settle all disputes and claims between them of whatsoever nature. E The purpose of this Deed is to record the settlement agreed between the Plaintiffs and the Defendants and their mutual release and indemnity of each other. … 2. SETTLEMENT … 2.3 The proceedings will be resolved on the following terms: 2.3.1 Statement of Claim dismissed. 2.3.2 Each party to pay his, her or its own costs. … 4 MUTUAL RELEASE In consideration of this Deed and the settlement recorded in this Deed, each of the Defendants and Bai Yi hereby release each of the Plaintiffs and and each of the Plaintiffs hereby release each of the Defendants and Bai Yi from all undertakings, obligations, actions, suits, causes of action, proceedings, claims, accounts and costs and expenses whatsoever both at law or in equity which any one or more of them has or had or may have against any one or more than one of the other arising out or related in any way either directly or indirectly to: 4.1 the proceedings; 4.2 the provision of interpreting and client liaison services by or at the request of the First and Second Defendants and Bai Yi to clients of the Plaintiffs and payment for those services. 5 BAR TO PROCEEDINGS This Deed may be pleaded as a bar to any action excluding potential proceedings for defamation to [sic] which notice was given prior to this deed being entered into commenced or to be commenced by any party against any other party which has been or may be brought out of any act or omission, advice, business, conduct, dealing or transaction arising before or after the execution of this document including, without limitation, any action by reason of or arising out of or in any way related, directly or indirectly, to: 5.1 the proceedings; 5.2 the provision of interpreting and client liaison services by or at the request of the First and Second Defendants and Bai Yi to clients of the Plaintiffs and payment for those services." 22 The construction question concerns the meaning of the phrase in cl 5 "… excluding potential proceedings for defamation to which notice was given prior to this deed being entered into …". 23 The plaintiff submitted that the meaning of the phrase was qualified by cl 4, by which the parties released each other from all claims relating directly or indirectly to the earlier proceedings, and to the provision of interpreting and client liaison services, and payment for those services. It was put that cl 5 expressly provided that the deed may be pleaded in bar to any action involving those matters. It followed that the exclusion in cl 5 relating to defamation proceedings operated to permit the plaintiff to bring these proceedings but did not enable the defendants to raise in these proceedings claims and disputes similar to those released under cl 4. It was put that to give the phrase a wider meaning which allowed the defendants to raise such issues in these proceedings would, for all practical purposes, defeat the releases provided by cl 4, a result which would be inconsistent with the parties' intention as evidenced by the deed as a whole. 24 On the other hand, the defendants' submission was that the intention manifested by the words of exclusion was that these proceedings were not affected by the deed, and the dismissal order, notionally, was made without prejudice to these proceedings. It was put that the construction for which the plaintiffs contend would be unreasonable in that it would mean that although under cl 5 it was envisaged that the plaintiffs would institute these proceedings, nevertheless the defendants would be restricted in their defence to issues other than those covered by cl 4. They submitted that such a construction should be rejected. 25 Well established principles of construction require determination of the parties' intention from the words used, read in context, and in light of the agreement as a whole. It is an objective exercise. The proper approach to the construction of the deed accepts that as it is similar to a commercial document it should be given a business-like interpretation. Its interpretation requires attention to the language used by the parties, the circumstances which the document addresses, and the objects which it is intended to secure (McCann v Switzerland Insurance Australia Ltd (Allen's case) [2000] HCA 65; (2000) 203 CLR 579, p 589). As with other instruments, preference is given to a construction supplying a congruent operation to the various components of the whole (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, pp 381-382). 26 In Taylor v Dexta Corporation Ltd & Ors [2006] NSWCA 310; (2006) 14 ANZ Insurance Cases 61-712, Santow JA pointed out (par 30) that "… A necessary corollary of that requirement for a commercial contract to be given a business-like interpretation is the frequent emphasis upon the need to arrive at an interpretation which is commercially sensible, and in accord with commercial reality". 27 Recently, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, at 179 it was said: "40. This Court, in Pacific Carriers Ltd v BNP Paribas , has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." 28 Accordingly, the scope of the words of exclusion in cl 5 depends upon the intention of the parties, which is a question of construction in light of the principles referred to. 29 It is self-evident that the deed is a carefully drafted instrument couched in ordinary language of unambiguous meaning. The underlying intention and purpose of the parties is reflected in Recitals D and E that the deed be a record of their settlement of the earlier proceedings, and of their mutual releases. The scope of the releases in respect of the earlier proceedings, and the provision of interpreting and client liaison services, is provided by cl 4. 30 Clause 5 records the agreement reached as to the type of action to which the deed may be pleaded in bar. In plain terms, the potential proceedings for defamation in the contemplation of the parties at the time the deed was made are expressed to be excluded from the class of action to which the bar may be pleaded. The term "proceedings" is ordinarily understood to be descriptive of the process of litigating the issues arising in a dispute between parties. This was the sense in which the term was used elsewhere in the deed with reference to the earlier proceedings. Consistently, in my opinion, the words "… proceedings for defamation …" were intended by the parties to refer to the entirety of the proceedings for defamation then expected to be commenced by the plaintiffs including, as is usual, the issues raised in the pleadings by the parties to them. Put another way, the words of exclusion demonstrate the common intention of the parties to preserve their entitlement to litigate all issues which may arise in the contemplated defamation proceedings. 31 In my opinion, there is nothing in the language of cl 5 taken alone, or when read with cl 4 and the rest of the deed, which supports an interpretation which bars or precludes the defendants from raising in defence to the plaintiffs' defamation action issues similar to those covered by the release in cl 4. Considered objectively, such an interpretation would defy common sense and reality. 32 Furthermore, if it was the common intention of the parties that the effect of the order for dismissal agreed upon in cl 2 was to prevent the defendant from raising issues in the defamation proceedings otherwise available to them, it would be both reasonable and a matter of common sense to expect the inclusion in cl 5 of clear words which expressed such intention. The absence of such words strongly reinforces my conclusion that this was not the intention of the parties, and that the construction proposed by the plaintiffs should be rejected. 33 In my opinion, the deed expressly excludes these proceedings from its application. It follows that, in its forensic context, the order constitutes what the parties intended to be the disposal of the earlier proceedings without limiting their rights in these proceedings. Accordingly, I find that the order for dismissal of the earlier proceedings raises no issue estoppel against the defendants in these proceedings. It follows that the plaintiffs' challenge to the specified particulars of justification must fail. Conclusion 34 The Court orders: (1) The plaintiffs' notice of motion filed 15 July 2009 be dismissed. (2) The plaintiffs pay the defendants' costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.