Supreme Court New South Wales Medium Neutral Citation: Pate v Bayly [2013] NSWSC 1465 Hearing dates: 10/09/2013 Decision date: 09 October 2013 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court orders that: (1) Leave is granted to Mr Bayly to file and serve the amended defence and the further amended cross claim within 14 days. (2) Costs of the motions are reserved. Catchwords: PROCEDURE Res judicata - issue estoppel - Anshun estoppel - whether defendants are estopped from filing proposed amended defence and proposed further amended cross claim - whether defendants' pleading should be struck out - whether summary judgment should be entered Legislation Cited: Credit (Commonwealth Powers) Act 2010 (Qld) Federal Court Act 1976 (Cth) Land Titles Act 1994 (Qld) National Consumer Credit Protection Act 2009 (Cth) Property Law Act 1974 (Qld) Uniform Civil Procedure Rules 1999 (Qld) Uniform Civil Procedure Rules 2005 Cases Cited: Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39 Blair v Curran (1939) 62 CLR 464 Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 66 Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 Kuligowski v Metrobus (2004) 220 CLR 363 Kuppers v New South Wales Fire Brigades [2005] NSWSC 193 McGuirk v The University of New South Wales [2009] NSWSC 1424 Murphy v Abi-Saab (1995) 37 NSWLR 280 O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 Zavodnyik v Alex Constructions Pty Ltd (2005) 67 NSWLR 457 Texts Cited: Fisher & Lightwood's Law of Mortgage, ELG Tyler & Ors, Australian Edition (Butterworths, 1995) Category: Interlocutory applications Parties: Ronald George Pate (First Plaintiff / First Cross Defendant) Bella Devsam (Second Plaintiff / Second Cross Defendant) Thomas Emmanuel Rehn (Third Plaintiff / Third Cross Defendant) Andrew Arnold Lucas (Fourth Plaintiff / Fourth Cross Defendant) Ellangee Pty Ltd (Fifth Plaintiff / Fifth Cross Defendant) PKT Springbook Pty Ltd (Sixth Plaintiff / Sixth Cross Defendant) John Edward McDonald (Seventh Plaintiff / Seventh Cross Defendant) Carol May McDonald (Eighth Plaintiff / Eighth Cross Defendant) Paul Boyd Skinner (Ninth Cross Defendant) Michael Brickell (Tenth Cross Defendant) AusWise Finance Pty Ltd (Eleventh Cross Defendant) Lantern Finance Pty Ltd (Twelfth Cross Defendant) Gail Maree Allison (Thirteenth Cross Defendant) Pathway Legal Pty Ltd (Fourteenth Cross Defendant) Representation: Counsel: A Fitzsimmons (Plaintiffs/1st to 8th Cross Defendants) C Freeman (First Defendant/Cross Claimant) D McLure (12th Cross Defendant) Solicitors: Stacks/The Law Firm (Plaintiffs/1st to 8th Cross Defendants) P Boyd-Skinner (9th & 11th Cross Defendants in person) M Brickell (10th Cross Defendant in person) File Number(s): 2012/52956 judgment 1HER HONOUR: The main issues raised are whether the defendants proposed amended defence and proposed further amended cross claim are the subject of issue estoppel or Anshun estoppel. If they are, the issue remains whether the defendants' pleadings should be struck out and summary judgment be entered. There are two notices of motion before the Court. 2By notice of motion filed 3 May 2013, the first defendant/cross claimant seeks an order that he be granted leave to amend his defence and cross claim. By amended notice of motion filed 12 July 2013, the first to eighth plaintiffs/the first to eighth cross defendant and the thirteenth to seventeenth cross defendants seek, firstly, an order pursuant to the Uniform Civil Procedure Rules 2005 ("UCPR") Part 13 Rule 13.4 that the defence and cross claim filed 12 December 2012 be dismissed, or in the alternative that the defence and cross claim filed 12 December 2012 be struck out pursuant to UCPR 14.28; and secondly, summary judgment pursuant to UCPR 13.1. 3The first plaintiff/first cross defendant is Ronald George Pate. The second plaintiff/second cross defendant is Bella Devsam. The third plaintiff/third cross defendant is Thomas Emmanuel Rehn. The fourth plaintiff/fourth cross defendant is Andrew Arnold Lucas. The fifth plaintiff/fifth cross defendant is Ellangee Pty Ltd (ACN 083 549 419). The sixth plaintiff/sixth cross defendant is PKT Springbrook Pty Ltd (ACN 142 958 932). The seventh plaintiff/seventh cross defendant is John Edward MacDonald. The eighth plaintiff/eighth cross defendant is Carol May MacDonald. For convenience, I shall refer to the first to eighth cross defendants as the "lenders". The ninth cross defendant is Paul Boyd-Skinner. Mr Boyd-Skinner is the director of AusWise Finance Pty Limited. The tenth cross defendant is Michael Brickell. Mr Brickell is the director of Lantern Finance Pty Limited. The eleventh cross defendant is AusWise Finance Pty Limited. The twelfth cross defendant is Lantern Finance Pty Limited. I shall refer to the ninth to twelfth cross defendants as the "brokers". The thirteenth cross defendant is Gail Maree Allison. The fourteenth defendant is Pathway Legal Pty Ltd (ACN 129 835 552). The thirteenth cross defendant is the director of the fourteenth cross defendant, the solicitors who acted for the lenders. The fifteenth to seventeenth cross defendants have been omitted from the proposed amended cross claim. 4The first defendant/cross claimant is Dallas Henry Bayly ("Mr Bayly"). The second defendant is Bridge Court Pty Ltd ("Bridge Court"). Mr Bayly is the director of Bridge Court. 5Mr Bayly relied on his affidavits filed 29 April 2013, 3 May 2013 and 31 May 2013. The plaintiffs/cross defendants relied on two affidavits of Gail Maree Allison sworn 27 June 2013, 28 June 2013 and the affidavit of Lindsay Malcolm Schmalkuche sworn 1 July 2013 (Ex A). 6It is common ground that the first defendant's case should be determined on the pleadings contained in the proposed amended defence (PAD) and the proposed further amended cross claim (PFAXC). It is only Mr Bayly who is seeking to file the PAD and PFAXC. What is not in dispute 7The following matters are not in dispute but are relevant to understanding the case brought by Mr Bayly. They are the loan agreement and securities entered into by the parties; the amount of the initial advance and repayments; and the application and orders made in District Court of Queensland, Southport Registry, Proceedings No 367/11 ("Queensland proceedings"). I shall briefly refer to them in turn. (a) The loan agreement and securities entered into by the parties 8The deed of loan dated 31 March 2011 is between Dallas Henry Bayly and Bridge Court Pty Ltd (ACN 140 091 514) and Ronald George Pate and Bella Devsam and Thomas Emmanuel Rehn and Ellangee Pty Ltd (ACN 08 549 419) as Trustee for the Lenridge Superannuation Fund and Andrew Arnold Lucas and John Edward MacDonald and Carol May MacDonald as Trustees for the MacDonald Family Pension Fund and PKT Springbrook Pty Ltd (ACN 142 958 932) as Trustee for the PKT Family Superannuation Fund (Ex 1). The relevant provisions of the deed of loan included the advance of $311,000 which was repayable within 3 months from 1 April 2011, the rate of interest which was 60% per annum and the default rate which was 120% per annum; that the collateral securities were required to be provided; and that Queensland law was the proper law of the deed. 9A registered mortgage No 7XXXXXX ("Queensland Mortgage") was provided by Mr Bayly to the plaintiffs in respect of X/X XXXX XXXXX, Broadbeach, Queensland ("the Queensland property"). 10Second registered Mortgage No AGXXXXXX was provided by Mr Bayly to the plaintiffs in respect of the six properties in New South Wales, one in Alexandria and five at Surf Beach ("the NSW properties"). 11Mr Bayly provided a guarantee and indemnity ("guarantee") to the plaintiffs. Bridge Court provided a deed of company charge to the plaintiffs. (b) The amount of the initial advance and repayments 12There is no dispute that on 1 April 2011, the advance of $311,000 was made by the plaintiffs to Mr Bayly and no part of the advance was repaid on or before 1 July 2011 (the due date for repayment). On 11 October 2011, $200,000 was paid by Mr Bayly to the plaintiffs. In 2012, $95,375.65 from the sale of the Queensland property was applied by the plaintiffs to the moneys advanced. The difference between the advance and the repayments is only $15,623.35, excluding the deductions. (c) The Queensland proceedings 13On 31 August 2011, the originating process was filed in the Queensland proceedings. The applicants (being the same entities as the plaintiffs in these proceedings) seek an order for possession against Mr Bayly as respondent, of the property known at Unit X, X XXXX XXXX, Broadbeach, in the State of Queensland being the land wholly contained in certificate of title folio identifier Lot X on BUP XXXXXX. The matter was listed for hearing on 3 October 2011. 14On 13 September 2011, Mr Bayly was personally served with the originating process. Mr Bayly did not file and serve a notice of address for service, nor an appearance or any other document in answer to the originating process. 15On 3 October 2011, the possession application was heard by McGuinness DCJ. There was no appearance by Mr Bayly. The application for possession proceeded in the absence of Mr Bayly pursuant to Uniform Civil Procedure Rules 1999 (Qld) Rule 476. The possession application was made pursuant to s 84 of the Property Law Act 1974 (Qld) and s 78 of the Land Title Act 1994 (Qld). 16On 3 October 2011, after hearing the possession application, McGuinness DCJ gave ex tempore reasons for granting the order for possession and made an order that Mr Bayly deliver up possession of the Broadbeach property to the first, second, third, fourth, fifth, sixth and seventh applicants together with costs. 17As at the date of the commencement of the Queensland proceedings and at the date of default judgment, Mr Bayly had not made the payment of $200,000. On 11 October 2011, Mr Bayly made a repayment of $200,000. The proposed cross claim 18It is important to note that in these current proceedings Mr Bayly is not alleging that all moneys advanced are not repayable. Rather, he seeks to raises three substantive issues. They are: (a) First, the plaintiffs have no entitlement to interest because of the contraventions of the National Consumer Credit Protection Act 2009 (Cth) and the National Credit Code ("Code"); (b) Second, and in the alternative, to the extent that "annual percentage rate" charged in respect of the loan exceeds 48%, such provision is void as a consequence of s 32(2) of the Credit (Commonwealth Powers) Act 2010 (Qld), the plaintiffs claim an entitlement to interest of 120% per annum in these proceedings; (c) Third, the Code that applies to the deed of loan and NSW mortgages was not complied with in various respects. As a consequence, the plaintiffs are liable for the imposition of a penalty and statutory compensation. Further, it is alleged that the plaintiffs were not entitled to charge Mr Bayly with the interest they did and certain imposts. All these matters impact upon Mr Bayly's total monetary liability under the loan and the interest calculation. 19The PFAXC set outs (at Schedule 2) the deductions that should not have been made together with the repayments. In short, Mr Bayly's main contention is that no moneys are owing. 20The relief the defendants claim can be summarised as the following orders and declarations: (a) That no interest is payable by reason of contraventions of the National Consumer Credit Protection Act and the Code, or alternatively, limiting the interest rate to an annual interest percentage rate of no more than 48% by reason of s 32(1) of the Credit (Commonwealth Powers) Act or to such other amount as the Court shall think fit; (b) In respect of penalties, damages and other monetary orders as a consequence of the contravention of the Code and the National Consumer Credit Protection Act. Summary judgment 21UCPR 13.4(1) provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, or if no reasonable cause of action is disclosed, or if the proceedings are an abuse of the process of the court. 22UCPR 14.28(1) provides that the Court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court. 23UCPR 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under subrule (1). 24Counsel for Mr Bayly submitted that the appropriate test for summary judgment was summarised by Johnson J in McGuirk v The University of New South Wales [2009] NSWSC 1424 at [37] - [38] where Johnson J stated: "[37] A very clear case is required before a litigant is prevented from pleading a case upon the basis that no reasonable cause of action is disclosed, and this power should be sparingly employed: Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; [1965] ALR 636; Webster v Lampard (1993) 177 CLR 598 at 602-3; [1993] HCA 57. The test is not whether the Plaintiff would probably fail in his action against the Defendant, it is whether the material before the Court demonstrates that the action should not be permitted to go to trial in the ordinary way because it is apparent that it must fail: Webster v Lampard at 602. The fundamental principle is that prima facie a plaintiff is entitled to have his case come to trial, and that an application to deprive him of that right will succeed only in the clearest of cases: Brimson v Rocla Concrete Pipes Limited (1982) 2 NSWLR 937 at 944. Usually, a party is not to be denied the opportunity to place his case before the Court in the ordinary way, and after taking advantage of the usual interlocutory processes. For a plaintiff to be shut out upon the basis that no reasonable cause of action is demonstrated, a high degree of certainty is required about the ultimate outcome of the proceeding, if it were allowed to go to trial in the ordinary way: Agar v Hyde (2000) 201 CLR 552 at 575-6. [38] For practical purposes, the present Defendant undertakes the burden of establishing that there is no triable issue by contending that there is no reasonable cause of action so that the amendment ought not be allowed: Wickstead v Browne (1992) 30 NSWLR 1 at 11. The General Steel test remains the primary touchstone for such an application. The mere fact (if it be the case) that a plaintiff's prospects of success might be characterised as slim, would not be enough to strike out a pleading: Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1995-1997) 188 CLR 241 at 271; Preston v Star City Pty Limited [1999] NSWSC 1273 at [31]. The question for determination is whether a reasonable cause of action is disclosed, that is a cause of action which has some chance of success, or which could conceivably give the plaintiff a right to relief, or which, although weak, is properly debatable, and has some apparent legitimate basis, if the facts upon which it is alleged to be based are made good: Preston v Star City Pty Limited at [37]". 25Recently, in O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 the Court of Appeal applied the High Court decision of Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118. In Spencer the High Court was concerned with s 31A(2) of the Federal Court Act 1976 (Cth) but the following principles are of general application: (a) On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded (at [23]). (b) The critical question can be expressed as whether there is more than a "fanciful" prospect of success (at [25]) per French CJ and Gummow J) or whether the outcome is so certain that it would be an abuse of the process of the court to allow the action to go forward (at [54]). Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success. 26Powers to summarily terminate proceedings must be exercised with exceptional caution (at [55]; see also French CJ and Gummow J at [24]). 27The plaintiffs must satisfy the Court that Mr Bayly's claims in the PAD and PFDAXC cannot succeed because it is certain that they are subject of either issue or Anshun estoppels. Overview of the estoppel claims 28The plaintiffs submitted that the Queensland proceeding gives rise both to an issue estoppel and an Anshun estoppel thus preventing Mr Bayly from raising in this proceeding the matters in the PAD and PFAXC. 29Issue estoppel and Anshun estoppel can be distinguished from res judicata. In Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 at 597 where Gibbs CJ, Mason and Aickin JJ cited Blair v Curran (1939) 62 CLR 464 Dixon J explained the distinction between res judicata and issue estoppel as follows: "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 form of 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." 30The Anshun principle represents an extension of those doctrines. Anshun estoppel will prevent a defendant from relying on a defence where, as their Honours explained in Anshun at 602: "it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it." Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiffs claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding." 31The plaintiffs rely upon these statements of issue estoppel and Anshun estoppel to submit that Mr Bayly cannot now deny his liability under the deed of loan and mortgages. The plaintiffs submitted first that Mr Bayly's liability is a state of fact or law "necessarily decided by the prior judgment"; and second, in any event it was unreasonable for Mr Bayly not to plead in the Queensland proceedings the defences upon which he now seeks to rely. 32The plaintiffs submitted that, a mortgagor's claims for money cannot generally overcome the mortgagee's claim to property and as a general rule, a mortgagor who wishes to restrain a mortgagee from exercising rights under the mortgage must pay the mortgage debt or, if the amount be disputed, pay into court the amount claimed by the mortgagee. No such offer has been made. This proposition is now debatable where the mortgage is in dispute (see Bayblu Holdings Pty Ltd v Capital Finance Australia Limited [2011] NSWCA 39 at [54] to [58] and [62]). (i) Issue estoppel 33Counsel for Mr Bayly's six submissions (some overlap) as to why these proceedings are not subject to issue estoppel are as follows. ● First, the same question has not been decided. ● Second, there is a distinction between a mortgagee's remedy to recover a debt and the right to possession and it was only the latter issue that was disputed in the Queensland proceedings. This distinction is described in Fisher & Lightwood's Law of Mortgage at page 315 and paragraph [16.4] as follows: "The mortgagee's remedies for recovery of the debt are either against the mortgagor personally, or by enforcement of the security... The remedy against the mortgagor personally is by an action for the debt. Usually the mortgage contains a covenant for payment, and the action is on the covenant. As just stated, the mortgagee is entitled to preservation of the security, and in general, he is entitled to enter into possession immediately upon the execution of the mortgage, but subject to relevant statutory provisions, particularly with respect to Torrens system land..." ● Third the plaintiffs obtained an order for possession of the Queensland property only pursuant to the Queensland mortgage. The right for the plaintiffs' to exercise the power of sale under the Queensland mortgage is only permissible when "default has been made in payment of the principal money or interest or any part of it secured by the ... mortgage and that default has continued for 30 days from service of the notice". The powers of the mortgagee are then enlivened under s 78 of the Land Titles Act 1994 (Qld), which includes a right to approach the Court for an order for possession. The only matter decided in the Queensland proceedings was that there had been a default in payment of "principal" under the Queensland mortgage that had continued for more than 30 days which enabled the order for possession of the Queensland property. There was no judgment or finding by the Court in respect of moneys owing under the mortgage, the loan agreement or the NSW mortgages. ● Fourth, Mr Bayly is not asserting in these proceedings that no amount of the advance is repayable to the plaintiffs, nor is he asserting that s 32 of the Credit (Commonwealth Powers) Act or the contraventions of the National Consumer Protection Act and the Code would result in the entire advance not having to be repaid. Had Mr Bayly defended the Queensland proceedings and raised these issues, it was clear at the date of filing and the date of judgment in those proceedings that the moneys were owing under the Queensland mortgage were not disputed which enlivened the right of the plaintiffs to an order for possession This is clearly illustrated by the fact that since the date of judgment in the Queensland proceedings, $295,796.65 has been paid to the plaintiffs. ● Fifth, the relief sought in the cross claim (if granted) does not set up any inconsistency with the order for possession of the Queensland property. It only challenges the deed of loan, NSW mortgages and the guarantee in a limited way. These latter issues were not decided in the Queensland proceedings. If one or more of the orders in the cross claim are made, the result will not be to set aside the loan agreement or require a full refund of all moneys advanced. No orders are sought in relation to the Queensland mortgage. There will be no inconsistency with the order for possession of the Queensland property as a consequence of there being a default in repayment under the Queensland mortgage at the date of the order. ● Sixth, applying the "practical test of whether a decision is fundamental [and] ask whether it is possible to appeal against the finding" it is obvious that no issue estoppel arises. 34Finally, the plaintiffs submitted it is difficult for the Court at this stage of proceedings to make a judgment without hearing all the evidence and cross examination as to which claims for relief would ultimately be successful. As such, and as a matter of discretion, the Court ought decline to deal with the issue estoppel claim until it makes a decision at a final hearing as to whether to grant any relief, and if so, the extent of that relief. At that stage the Court can determine whether any such relief should be refused by reason of an issue estoppel. The law on issue estoppel 35The principles governing the application of issue estoppel are uncontroversial. In Kuligowski v Metrobus (2004) 220 CLR 363, in a unanimous decision, the High Court noted that there are three requirements for the doctrine to apply in a second set of proceedings. They are first, the same question has been decided; second, that the judicial decision which is said to create the estoppel was final; and finally, that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies. 36The parties in both proceedings are identical. The orders made in the Queensland proceedings are final. No application has been made by Mr Bayly to have the Queensland judgment set aside. Hence, the first two requirements of issue estoppel are satisfied. That leaves the issue as to whether that final requirement is satisfied, namely has the same question has been decided? 37In Kuppers v New South Wales Fire Brigades [2005] NSWSC 193 Johnson J succinctly and accurately stated this test as follows: "Same Question? [23] In Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271 at 276, Barwick CJ encapsulated what was involved in answering that question by saying: 'Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case.' [24] In Kidigowski v Metrobus, above, at 12 (paragraph 40), in a unanimous decision, the High Court applied this statement by Barwick CJ in Ramsay v Pigram. [26] In Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532-533, Dixon J said that what is precluded by issue estoppel is what is legally indispensable to the conclusion. In the case of matters of fact, the issue estoppel is confined to the ultimate facts which form the ingredients in the cause of action - facts fundamental to the decision. In Murphy v Abi-Saab, above, Gleeson CJ (Kirby P and Rolfe AJA agreeing), said at 288E-F: 'The difficulty is to distinguish between decisions of fact or law fundamental or cardinal to the judgment and other decisions. One thing, however, is clear. Only a decision about a matter which it was necessary to decide can create an issue estoppel. It is, therefore, essential to approach reasons for judgment which are said to create an estoppel with an accurate understanding of what the author of the reasons was required to decide. A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding: Spencer Bower and Turner, the Doctrine of Res Judicata, 2nd ed (1969) at 182; Talyancich v Index Developments Limited (1992) 3 NZLR 28'." 38On this topic of issue estoppel, both parties referred to Murphy v Abi-Saab (1995) 37 NSWLR 280 as being authority for their propositions. (ii) Consideration of Murphy v Abi-Saab 39In Murphy v Abi-Saab, the Court of Appeal considered proceedings in which an issue estoppel was held to arise from an order for possession made in favour of a mortgagee, Murphy, with the consent of the mortgagor, Abi-Saab. Murphy v Abi-Saab is instructive so I have quoted this decision at length. 40In Murphy v Abi-Saab, Gleeson CJ (with whom Kirby P and Rolfe AJA agreed) stated at 287 - 289: "In Rogers v The Queen (1994) 181 CLR 251 at 261, Brennan CJ said that the essence of the doctrine of issue estoppel was defined in the following words of Dixon J in Blair v Curran (at 531): "A judicial determination directly involving an issue of fact or of law disposes once for all of the issues, so that it cannot afterwards be raised between the same parties or their privies." ... Where there are pleadings, the nature of the resulting estoppels may depend upon choices made by the parties as to what they will plead. (Indeed, this is why the Anshun principle is necessary. In Anshun itself it was the authority's failure to plead its asserted right of indemnity as a defence to Anshun's claim for contribution that meant there was no strict issue estoppel: see 147 CLR 589 at 598.) In Carl Zeiss Stiftung v Rayner and Keeler Ltd (No 2) [1967] 1 AC 853 at 965, Lord Wilberforce addressed the question how one decides what issues of fact and law are involved in a judicial decision. He said: "... One way of answering this is to say that any determination is involved in a decision if it is a 'necessary step' to the decision or a 'matter which it was necessary to decide, and which was actually decided, as the groundwork of the decision' ... And from this it follows that it is permissible to look not merely at the records of the judgment relied on, but at the reasons for it, the pleadings, the evidence ... and if necessary other material to show what was the issue decided." In Blair v Curran (at 532-533), Dixon J said that what is precluded by issue estoppel is what is legally indispensable to the conclusion. In the case of matters of fact, the issue estoppel is confined to the ultimate facts which form the ingredients in the cause of action; facts fundamental to the decision. He said (at 532-533): "... Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order ..., the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself .... Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous." The difficulty is to distinguish between decisions of fact or law fundamental or cardinal to the judgment and other decisions. One thing, however, is clear. Only a decision about a matter which it was necessary to decide can create an issue estoppel. It is, therefore, essential to approach reasons for judgment which are said to create an estoppel with an accurate understanding of what the author of the reasons was required to decide. A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding: Spencer Bower and Turner, The Doctrine of Res Judicata, 2nd ed (1969) at 182; Talyancich v Index Developments Ltd [1992] 3 NZLR 28. Since finality of litigation is a primary object of the principle underlying issue estoppel, it would be incongruous if the doctrine operated so as to force a litigant to appeal in order to displace part of the reasoning of a court whilst having no intention, and perhaps no hope, of displacing the judgment: Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37. In applying these principles to the present case it is necessary to examine what was at issue in Equity proceedings No 4685 of 1992 before Powell J, and what was fundamental to his reasoning in determining that issue. The ultimate issue was the mortgagees' right to possession of the land the subject of the declarations and orders claimed. Upon default by a mortgagor the mortgagee becomes entitled to possession." 41The Chief Justice in Murphy v Abi-Saab continued (at 290 - 192): "The primary reason given by Powell J for concluding that the mortgagors had no arguable defence to the claims by the mortgagees relating to the possession of land was that an issue estoppel arose out of the earlier Judgment in the Common Law proceedings, supported by the refusal of Newman J to set that Judgment aside Powell J identified the issue estoppel as going to the following matters the existence of a debt owed by the mortgagors to the mortgagees (the quantification of the debt being immaterial), the existence of the mortgages as security, default by the mortgagors. None of that is inconsistent with the claim for damages or equitable compensation now sought to be raised in the Commercial Division, even assuming that such claim to involve a right of equitable set-off. ... It has been submitted by Senior Counsel for the Appellants that the finding by Powell J that a debt existed (the mortgagors being estopped from denying the existence of the debt) necessarily involved a finding that there was no defence by way of equitable set-off to claim for the debt. ... It has been submitted by senior counsel for the appellants that the finding by Powell J that a debt existed (the mortgagors being estopped from denying the existence of the debt) necessarily involved a finding that there was no defence by way of equitable set-off to a claim for the debt. This submission, however, takes no account of the following matters. Firstly, it is one thing to find that a debt existed, and a different thing to find that the amount of the debt was the amount later claimed in the Commercial Division proceedings. There is more than $8 million involved in the difference. Secondly, where the claim for damages or equitable compensation arguably giving rise to an equitable set-off is, as in the present case, unliquidated, a reference to "the existence of a debt" is not inconsistent with an acknowledgment of the possibility of establishing such a claim. Thirdly, the reasoning of Powell J has to be understood in the context of a mortgagee's claim for possession of mortgaged land, in a situation where there has been a failure by the mortgagors to comply with the covenants for the mortgage, and in particular, those relating to payment of the sum secured. There was, therefore, no inconsistency between what Powell J said, on 1 October 1992, about proceedings No 4685 of 1992, and what he said, and did, on 8 October 1992, about proceedings No 4650 of 1992. Similarly, what Powell J went on to say about the alternative or, "Anshun", estoppel arising from the earlier judgment in the Common Law proceedings, needs to be understood in the light of the matters that were in issue before him on 1 October 1992. In relation to proceedings No 4685 of 1992 they were matters relating to the mortgagees' right of possession of the subject land. It is those matters which were before Powell J on 1 October 1992 also in relation to proceedings No 4650 of 1992. In relation to the latter proceedings, it was the notice of motion of the mortgagors seeking to restrain the mortgagees from exercising their rights of possession, and not the entire claim for damages or equitable compensation, which was before Powell J. This, no doubt, is the reason why Powell J perceived no inconsistency between what he said about the "Anshun" estoppel on 1 October 1992 and his refusal to dismiss proceedings No 4650 of 1992 on 8 October. When he was referring to the "Anshun" estoppel, what it was necessary for Powell J to decide was whether the mortgagor's claims for damages or equitable compensation gave rise to a defence to the mortgagees' claim for possession. He expressed what he said as one of his reasons for deciding that issue in favour of the mortgagees. If what he said went beyond that, it was not necessary for his decision. Bearing in mind the matters that were before him for determination on 1 October 1992, a finding by Powell J that the mortgagors no longer had any claim whatever for damages or equitable compensation against the mortgagees would have gone far beyond what it was necessary, or what it was proper, for Powell J to determine on the occasion. ... To apply the practical test earlier mentioned, one might ask what the position would have been if, following the decision of 1 October 1992, the mortgagors had sought to appeal but had limited their challenge to the findings made by Powell J about their claim for damages or equitable compensation. Such an appeal would have been hopeless. They would have had no answer to the argument that the mortgagors were entitled to possession of the subject land, and that the declarations and orders made by Powell J were perfectly appropriate. ... An appellate court would not have embarked upon the exercise of deciding the validity of their claim for damages or equitable compensation. Hunter J was correct to conclude that there is no issue estoppel defeating the defence and cross-claim in the Commercial Division proceedings. The appeal should be dismissed with costs." 42Thus, in Murphy v Abi-Saab, the Court concluded that an issue estoppel arising from a possession order did not extend to preventing the mortgagor from raising cross claims for damages or equitable compensation. 43Mr Bayly concedes that the following matters were treated as necessarily decided by the consent order in the Queensland proceedings, the existence of a debt owed by the mortgagor to the mortgagee; the existence of the Queensland mortgage as security; and default by the mortgagor. To those matters may be added the following: (a) service on the mortgagor of relevant statutory notices and demands; (b) continuing default by the mortgagor after the period specified in those notices; and (c) personal service of the originating application on the mortgagor. 44The plaintiff submitted that the order made in the Queensland proceedings was premised on the propositions that the deed of loan and mortgage are valid and enforceable, and not liable to be impugned or set aside by application of the National Credit Code, statutory unconscionability, or for any other reason and that those matters were necessarily decided by the Queensland order. The plaintiff further submitted that the evidence relied on for possession in the Queensland proceeding is the same evidence that is pleaded and relied on in this proceeding and if Mr Bayly were permitted to plead and rely on his defences and cross-claim based on the National Credit Code and statutory unconscionability, and was ultimately successful on those arguments to defeat the plaintiffs' claim for possession of the NSW properties, there would be a direct inconsistency between the order made in the Queensland proceeding and the orders made in this proceeding. 45In the Queensland proceedings, the ultimate issue was the mortgagee's right to possession of the Queensland land upon default by the mortgagor the mortgagee becomes entitled to possession. The evidence relied on in the Queensland proceedings was limited. I agree that the issue estoppel that arises in these current proceedings go to the following matters, first, the existence of a debt owed by the mortgagor to the mortgagees; second the existence of the Queensland mortgage as security; and finally, default by Mr Bayly in relation to his obligation contained in the loan agreement to make payments. 46In these current proceedings, the plaintiff is not seeking to impugn the order for possession made in the Queensland District Court. After that order was made, the mortgagees sold the Queensland property and the proceeds of sale were applied to reduce the amount Mr Bayly owed under the loan agreement. In my view, the orders that may be made in these proceedings will not be inconsistent with the order made for possession in the Queensland proceedings. 47As a matter that was necessary to decide in earlier proceedings can create an issue estoppel, it was not necessary for the Queensland District Court Judge to determine any right that the mortgagors have to possession to the NSW properties relying on the security of the NSW mortgages. The quantification of the debt was immaterial so it was not necessary to determine the actual amount of money owing (principal and interest) under the loan agreement. Nor was it necessary for the Queensland Court to determine whether Mr Bayly was liable under the guarantee to repay the moneys. 48Mr Bayly in these current proceedings is seeking to challenge his obligation to pay interest at the high rate stipulated in the loan agreement pursuant to certain statutory provisions of the National Credit Code and the Credit (Commonwealth Powers) Act 2010. He is not putting in issue that the mortgagors were not entitled to an order for possession in relation to the Queensland property. 49Applying the practical test referred to in Kuppers and Murphy v Abi-Saab, if Mr Bayly had appealed the decision in the Queensland proceedings, the appellate court would not have embarked on an exercise of examining the interest provisions of the loan, or whether to vary the terms of the loan agreement should be varied particularly so far as interest is concerned, or a claim for statutory compensation, or the existence of the NSW mortgages or the guarantee in order to determine whether the decision was correct. Hence, it is my view that it is far from certain that issue estoppel applies to these proceedings. Anshun estoppel 50The operation of an Anshun estoppel arises "based on the reasonableness ... of the conduct of a litigant". The "unreasonableness" criterion involves an evaluation of what the party could reasonably have been expected to do in the first proceeding. 51In Anshun, the High Court pointed to the following factors as material to the determination of whether a defendant will be estopped from raising a defence, the nature of the plaintiffs claim; the subject matter of the plaintiffs claim; and whether, having regard to those matters, it would be expected that the defendant would raise the defence in the same proceeding. 52A question of Anshun estoppel may also arise where a matter not raised as a defence is later raised as a cause of action, or where a matter is not brought as a cross claim, or where a matter is not brought as a claim in earlier proceedings but is later raised as a cause of action (Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 at 673, Champerslife Pty Ltd v Manojlovski (2010) 75 NSWLR 245 at 253, citing Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287; and Zavodnyik v Alex Constructions Pty Ltd (2005) 67 NSWLR 457 at 464). 53The plaintiffs submitted that to the extent Mr Bayly's defences and cross claim challenge the existence of liability under the deed of loan and mortgages, he could and should have advanced those matters in the Queensland proceedings and it was unreasonable for him not to have done so. Counsel for the plaintiffs also pointed out that Mr Bayly was personally served with the originating application in the Queensland proceedings, which on its face sought an order for possession. He submitted that there was no evidence that Mr Bayly was unable to defend that proceeding had he wished to do so, and no explanation for why he did not do so. Mr Bayly was subsequently served with the order for possession, and still did not take any step to set aside or appeal from that order. According to the plaintiffs, Mr Bayly's failure to raise in the Queensland proceedings the defences and cross claims he now seeks to raise was unreasonable. 54So far as the plaintiffs' criticism that Mr Bayly has not provided an explanation is concerned, it is not correct. As referred to earlier, Mr Bayly has explained why he did not take any active role in the Queensland proceedings. His reasoning was that if he allowed the plaintiffs to sell the Queensland property, which he believed to be valued at $190,000 together with a foreshadowed payment on 11 October 2011 of $200,000 (shortly after the order for possession was made), it would be enough to pay out the arrears of the loan. In my view, Mr Bayly's explanation for not defending the Queensland proceedings in these circumstances is a reasonable one. 55Counsel for Mr Bayly submitted that it was never Mr Bayly's position during the Queensland proceedings, he had a defence to repayment of the entire amount advanced. Mr Bayly further submitted that the problem with the Anshun defence in this case is that it fails at the first hurdle because in the Queensland proceedings as the plaintiffs themselves failed to raise matters in relation to the deed of loan, NSW mortgages and the guarantee in the Queensland proceedings and they could have done so. 56As previously stated, the issue for determination in the Queensland proceedings was an entitlement to possession under the Queensland mortgage. Mr Bayly in these proceedings makes no claim in relation to the Queensland mortgage nor does he assert or seek any order which would be inconsistent with the order for possession. 57It is my view it was not unreasonable for Mr Bayly not to raise these current matters in circumstances where it was not disputed that some part of the principal had to be repaid while the Queensland proceedings were on foot. 58My conclusion is that it is far from certain that res judicata applies to these proceedings. 59The result is that Mr Bayly should be permitted to file his PAD and PFAXC. Accessorial liability 60At [66] to [69] the defendants plead accessorial liability as against the brokers. Counsel for Lantern Finance Pty Ltd submitted (and these submissions were adopted by the other brokers) that the case is not properly pleaded against it. As was stated by Jacobsen J in Addenbrooke Pty Ltd v Duncan (No 2) [2013] FCA 820 at [3], [4] and [6]. "[3] It is well established that the expression "any person involved in the contravention" in s 12GF of the ASIC Act, as defined in s 79 of the Corporations Act 2001 (Cth) (Corporations Act) is relevantly identical to s 75B(1) of the former Trade Practices Act 1974 (Cth) and that jurisprudence that has been developed in relation to that section is applicable to the meaning of the phrase: see Roumanus v Orchard Holdings (NSW) Pty Ltd (in liq) (2012) 90 ACSR 677 at [178]. [4] Thus, what is required to give rise to accessorial liability in the present case is actual knowledge of the falsity of the representation comprising the primary contravention and intentional participation in the contravention. These are essential matters which must be alleged and pleaded: Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1 at [10]-[15]; SAS Financial Services Pty Ltd v Trew [2006] WASCA 252 at [12]. [6] It is important to bear in mind that the concept of accessorial liability under s 79 of the Corporations Act and its analogues imports quasi criminal standards in imposing civil liability: Yorke v Lucas at 667-669." 61After I heard submissions on this topic, I decided that the pleading in relation to accessorial liability was deficient. Counsel for the defendants was directed to forward an amended pleading on the topic of accessorial liability to the cross defendants and they were directed to respond with any further objections. Costs in relation to these amendments are reserved and I reserve the question of costs of the motions generally. The Court orders that: (1) Leave is granted to Mr Bayly to file and serve the amended defence and the further amended cross claim within 14 days. (2) Costs of the motions are reserved. ********** 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. Decision last updated: 10 October 2013