Supreme Court New South Wales

• Medium Neutral Citation: Beck v Weinstock Beck v LW Furniture (Consolidated) Pty Ltd [2011] NSWSC 1195
• Hearing dates: 18 August 2011
• Decision date: 11 October 2011
• Jurisdiction: Equity Division
• Before: Gzell J

Decision

Case of res judicata made out. Portions of amended notice of motion in earlier action and portions of statement of claim in new action struck out.

• Catchwords: PROCEDURE - Striking out portions of Pleadings - earlier action settled by consent orders - amended notice of motion to raise issues subject of the earlier action - new action as well - whether premature - issues of interpretation of consent orders and alleged breaches to be tried
• Legislation Cited: Uniform Civil Procedure Rules 2005; Trade Practices Act 1974 (Cth)
• Cases Cited: Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529; Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218; Habib v Nationwide News Pty Ltd (No 2) [2010] NSWCA 291; Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1987-1988) 164 CLR 502; Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334; Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235
• Category: Procedural and other rulings
• Parties: 2007 Proceedings; Tamar Rivqa Beck (First Plaintiff); Alem Pty Ltd (Second Plaintiff); Amiran David Weinstock (First Defendant); Helen Weinstock (Second Defendant); Zipor Pty Ltd (Third Defendant); John Halliday (Fourth Defendant); LW Furniture Consolidated (Aust) Pty Ltd (Fifth Defendant); 2011 Proceedings; Tamar Rivqa Beck (First Plaintiff); LW Furniture (Consolidated) Pty Ltd (First Defendant); Amiran David Weinstock (Second Defendant); Helen Weinstock (Third Defendant); Michael Victor Henley (Fourth Defendant); Zipor Pty Ltd (Fifth Defendant)
• Representation: Counsel; 2007 Proceedings; N Hutley SC/G Colyer (First Plaintiff/Respondent); I Jackman SC/S Nixon (First and Second Defendants/Applicants); 2011 Proceedings; N Hutley SC/G Colyer (Plaintiff/Respondent); I Jackman SC/S Nixon (First to Third Defendants/Applicants); Solicitors; 2007 Proceedings; Harris Freidman (First Plaintiff/Respondent); Baker & McKenzie (First and Second Defendants/Applicants); 2011 Proceedings; Harris Freidman (Plaintiff/Respondent); Baker & McKenzie (First to Third Defendants/Applicants)
• File Number(s): 2007/287773; 2011/111682

Judgment

Introduction

1 An application to strike out or stay portion of an amended notice of motion with respect to proceedings commenced in 2007 and an application to strike out or stay portion of a statement of claim in proceedings commenced in 2011 were brought before the court.

2 The basis of the applications was that the 2007 proceedings had been settled by consent orders and the amended notice of motion and the 2011 proceedings sought to reopen matters that had merged in the orders and the principle of res judicata applied.

3 Both proceedings arose out of the administration of the estate of the late Leo Rearie Weinstock and the estate of the late Hedy Jadwiga Weinstock, his wife.

2007 proceedings

4 The first plaintiff in the 2007 proceedings was Tamar Rivqa Beck, the daughter of the late Leo Weinstock and the late Hedy Weinstock.

5 The second plaintiff in the 2007 proceedings was Alem Pty Ltd which sought an order that a deed of release between it and the first defendant be set aside.

6 The first defendant, Amiram David Weinstock, is the brother of Tamar Beck. He was the executor of the estate of the late Leo Weinstock and one of the executors of the estate of the late Hedy Weinstock.

7 In the amended statement of claim in the 2007 proceedings, Tamar Beck raised a number of complaints about Amiram Weinstock's administration of the two estates.

8 The late Hedy Weinstock had given a power of attorney to the late Leo Weinstock and to Amiram Weinstock. As such attorney, Amiram Weinstock transferred one "A" class share in the third defendant, Zipor Pty Ltd, to his wife Helen Weinstock, the second defendant. The consideration was $1.

9 In the amended statement of claim it was alleged that by transferring the late Hedy Weinstock's Zipor share to Helen Weinstock, Amiram Weinstock delivered control of the general meeting of Zipor to himself and his wife; the transfer did not occur at fair market value and thereby conferred a direct unconscionable benefit upon Helen Weinstock or an indirect unconscionable benefit upon Amiram Weinstock and companies they controlled; that Amiram Weinstock gave himself and Helen Weinstock the power to declare dividends on behalf of Zipor for the benefit of a "C" class shareholder, LW Furniture (Consolidated) Pty Ltd, which Amiram Weinstock controlled; and that Amiram Weinstock otherwise depleted the value of the shareholding in Zipor in Hedy Weinstock's estate.

10 It was alleged that following the transfer of the Zipor share to Helen Weinstock, Amiram Weinstock and she declared a dividend of $3,683,752.80 with franking credits of $1,578,751.20 in the year ended 30 June 2004, $3,676,400.00 of which with franking credits of $1,575.600 was payable to LW Furniture Consolidated.

11 It was alleged that in the year ended 10 May 2006, Zipor declared a dividend of $3,182,753 with franking credits of $1,364,032.60 of which $3,176,400 with franking credits of $1,361,310 was payable to LW Furniture Consolidated.

12 It was alleged that by Amiram Weinstock's breach of fiduciary duty the late Hedy Weinstock's estate suffered a loss of $9,809,289.60 being the sum of the dividends and franking credits and the value of Tamar Beck's share of Hedy Weinstock's estate was diminished accordingly.

13 The fourth defendant in the 2007 proceedings was John Halliday, the accountant for the Weinstock group at the relevant time and the fifth defendant was another company within the group, LW Furniture Consolidated (Aust) Pty Ltd.

Consent orders

14 The parties to the 2007 proceedings together with Michael Victor Henley who, it was proposed, should become the administrator cta upon the revocation of the grant of probate of the late Leo Weinstock's estate to Amiram Weinstock, executed the consent orders.

15 They were made by Hamilton AJ on 16 September 2010 when his Honour was told that the orders resolved all matters in the 2007 proceedings apart from an issue with respect to preference shares. On 17 September 2010 his Honour delivered reasons for judgment in relation to the preference share issue and on 21 September 2010 his Honour made orders declaring the 8 "C" class shares held by the estate of the late Hedy Weinstock in LW Furniture Consolidated were not preference shares, the purported redemption of them was void, and the share register was to be rectified. That decision was the subject of a successful appeal. The consent orders were entered on 1 December 2010.

16 With respect to the Zipor dividends, the consent orders provided as follows:

"1. Within 14 days the First defendant:

....

(c) account (with interest at Court rates) to the Leo Estate for any benefits received by him and/or any company in which he is a director or shareholder and/or any trust in which he is a beneficiary and/or any funds paid to his spouse or children during the period 28 November 2003 and the date the First defendant transfers the shares referred to in (a) to the Leo Estate.

....

5. The Court notes that LW Furniture (Consolidated) Pty Limited agrees to pay Zipor Pty Limited within 120 days the amount which it received as a dividend from Zipor Pty Limited being:

(a) $3,676,400 declared on 17 November 2003; and

(b) $3,176,400.00 declared on 5 June 2006.

plus interest on those amounts at Court rates from the date dividends were paid or the date interest commenced to be paid or the date when the liability to pay interest on the LW Furniture Consolidated Pty Limited loan account arises, whichever is earlier.

....

8. In consideration for the payments pursuant to orders 5-7 inclusive the Court notes that:

(a) the First Defendant, the Second Defendant and LW Furniture (Consolidated) Pty Limited (by its directors, the First and Second Defendants) warrant that to their knowledge and based on their reasonable inquiries the only benefits received by them or any one of them are as disclosed in orders 5 to 7 inclusive and annexure B;

(b) acknowledge that the First Plaintiff has agreed to these consent orders in reliance upon such warranty.

...

Annexure B

...

Zipor Pty Ltd

Dividends declared

		2 X B Class Shares		1,000 X C Class
	Hedy Weinstock	Ami Weinstock	LW Consolidated
2003	$0.00		$0.00			$0
2004	$3,676.40		$3,676.40			$3,676,400
2005	$0		$0			$0
2006	$3,176.40		$3,176.40			$3,176,400
2007	$500		$500			$500,000
2008	$250		$250			$250,000
2009	$250		$250			$250,000
Total	$7,852.80		$7,852.80			$7,852,800

Amended notice of motion

17 The amended notice of motion was in the following terms:

"1. Leave to join Michael Victor Henley, in his capacity as administrator cta of the Leo and Hedy Estates, as a Defendant.

2. A declaration that upon the proper construction of paragraph 1(c) of the Consent Orders the First Defendant is obliged to account to the Leo Estate for all dividends that he, the Second Defendant and LW Furniture (Consolidated) Pty Limited ACN 000 891 876 [ LWFC ] received from Zipor, including the dividends declared as shown on Annexure "B" to the Consent Orders and the dividend declared on 1 May 2010 [The AW Zipor Dividends] .

3. Alternatively, an order varying the orders made on 21 September 2010 herein by adding the following additional order: -

"The issues arising our (sic) of prayers 9A, 9B and 9C in the Amended Statement of Claim be dealt with separately and in advance of any other issues in the proceedings".

4. Alternatively leave to re-open in respect of the issues raised by paragraphs 34 to 46 of the Amended Statement of Claim.

5. Judgment on the issues raised by paragraphs 34 to 46 of the Amended Statement Claim. Including:-

(a) Damages;

(b) Equitable compensation;

(c) An order that the First Defendant give restitution to the First Plaintiff for the loss suffered by her as a consequence of the transfer of one "A" class share in Zipor by the First Defendant as attorney for Hedy Jadwaga Weinstock ("Hedy") to the Second Defendant on 21 October 2003;

(d) Further or alternatively, a declaration that the First and Second Defendants must account to Hedy's Estate for any and all benefits received by them, or companies or entities controlled by them, by reason of the dividends and distribution of franking credits by Zipor after 21 October 2003.

6. Alternatively, directions for the determination of the issues raised by paragraphs 34 to 46 of the Amended Statement of Claim.

7. Alternatively, a declaration that the First Plaintiff is entitled to bring fresh proceedings raising the matters that were covered by paragraphs 34 to 46 of the Amended Statement of Claim.

8. Such other orders as the court thinks fit.

9. Costs."

18 Mr Hutley SC who with Mr Colyer appeared for Tamar Beck and Alem indicated that he did not press paragraphs 3 and 7 of the amended notice of motion.

19 Mr Jackman SC who with Mr Nixon appeared for Amiram Weinstock and the other defendants indicated that he did not seek to stay or strike out paragraphs 1 and 2 of the amended notice of motion. What were sought to be struck out or stayed were paragraphs 3 to 7.

20 Paragraphs 9A, 9B and 9C of the prayers for relief in the 2007 proceedings raised the redeemable preference issue that was determined by Hamilton AJ on 21 September 2010. To seek to add to those orders a further order that the issues in the redeemable preference matter be dealt with separately and in advance of any other issues in the proceedings is suggestive of an attempt by Tamar Beck to reopen the entirety of the 2007 proceedings other than the redeemable preference share issue. But the matter is not pressed on the strike out or stay application.

2011 proceedings

21 The 2011 proceedings were brought by Tamar Beck against LW Furniture Consolidated, the first defendant, Amiram Weinstock, the second defendant, Helen Weinstock, the third defendant, Michael Henley, the fourth defendant, and Zipor, the fifth defendant.

22 Paragraph 1 of the relief claimed sought a declaration as to the proper construction of the agreement in paragraph 5 of the consent orders in like terms to the declaration sought with respect to the 2007 proceedings in the amended notice of motion. Alternatively, rectification was sought and an order for specific performance was claimed.

23 Paragraphs 8 and 9 were the subject of the strike out or stay application with respect to the 2011 proceedings. They were in the following terms:

"8. An order that Ami give restitution to Tami for the loss suffered by her as a consequence of the transfer of one "A" class share in Zipor by Ami as attorney for Hedy to Helen on 21 October 2003.

9. Further or alternatively a declaration that Ami and Helen must account to Hedy's Estate for any and all benefits received by them, or companies or entities controlled by them, by reason of the declarations of dividends and distribution of franking credits by Zipor after October 2003."

24 Also the subject of the strike out or stay application with respect to the 2011 proceedings were paragraphs 7 to 31 of the statement of claim which were in almost identical terms to the allegations of fact with respect to the Zipor claim in the amended statement of claim in the 2007 proceedings.

25 Paragraphs 32 to 36 of the statement of claim in the 2011 proceedings were not the subject of the strike out or stay application. Paragraph 32 and 33 allege a breach by LW Furniture Consolidated of the consent orders of 16 September 2010 by its failure to pay Zipor the amounts it received as dividends. Paragraph 34 makes various allegations about pre-contractual representations culminating in the claim of estoppel and a claim for rectification. Paragraph 35 is an allegation of breach of warranty. Paragraph 36 argues that the warranty was a false and misleading representation entitling Tamar Beck to have the consent orders set aside.

26 It was put by Mr Jackman that Tamar Beck was informed of the dividends in Annexure "B" to the consent orders but chose to seek repayment of only the "big ticket items" that amounted to $100,000.

27 But Annexure "B" did not reveal dividends declared by Zipor in May 2010 of $250,000 for LW Furniture Consolidated and $250 for each of Amiram Weinstock and Helen Weinstock. These additional dividends lie at the heart of the breach of warranty case that Tamar Beck wishes to raise.

Authorities

28 Reference was made to Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529 where a majority of the High Court held that there was no inherent power in a court to deal further with an appeal that had already been dismissed by formal order in conformity with an order pronounced, where the order was entered before an application to vary it was made. At [1]; 530 Barwick CJ said:

"Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed."

29 In Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218, the Court of Criminal Appeal of this State had delivered judgment and orders reflecting its judgment had been entered when the court realised that it had proceeded on an incorrect understanding of the facts giving rise to the appeal. It held that it had power to reopen the appeal and, after reconsideration, ordered that its previous orders be confirmed. A plurality of the High Court held that the Court of Criminal Appeal had no power to reopen the appeal once judgment had been delivered and orders reflecting the judgment had been formally entered. The Court said at [20]; 224:

"Identifying the formal recording of the order of a superior court of record as the point at which that court's power to reconsider the matter is at an end provides a readily ascertainable and easily applied criterion. But more than that, identifying the formal recording of the order as the watershed both marks the end of the litigation in that court, and provides conclusive certainty about what was the end result in that court."

30 In Habib v Nationwide News Pty Ltd (No 2) [2010] NSWCA 291 the Court of Appeal dismissed an application to set aside a costs order made in the determination of an earlier appeal. In [27] - [28] the court followed Bailey and Burrell .

31 It was submitted that paragraphs 3 to 7 of the amended notice of motion in the 2007 proceedings and paragraphs 7 to 31 of the statement of claim in the 2011 proceedings fell foul of these authorities, the consent orders having been entered before the amended notice of motion in the 2007 proceedings and the statement of claim in the 2011 proceedings had been filed.

32 Reference was also made to Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1987-1988) 164 CLR 502 in which the Deputy Commissioner of Taxation obtained a judgment in his favour but the judgment was entered for less than the amount actually due. The High Court held that the Deputy Commissioner's action for recovery of the balance was not maintainable as his cause of action had merged in the judgment thereby destroying its independent existence while the judgment stood. At [15]; 508 Deane, Toohey and Gaudron JJ said:

"The fact that a judgment is entered by consent may on occasion make it hard to say what was necessarily decided by the judgment, especially where it is the defendant who wishes to bring action at a later date: Isaacs v. Ocean Accident and Guarantee Corporation Ltd [1958] SR (NSW) 69 at 75, per Street CJ and Roper CJ in Eq; cf Owen J at 79-80. But the principle of res judicata holds good in such a case."

33 Their Honours went on at [21]; 510-511 to say:

"The point of the present appeal is that the respondent brought an action against the appellant and recovered judgment against him. He obtained a judgment of the Court in which the cause of action upon which he relied merged, thereby destroying its independent existence so long as that judgment stood. And, so long as that judgment stands, it is not competent for the respondent to bring further proceedings in respect of the same cause of action. It is no answer to say that the Court might, if appropriate, stay the second action as an abuse of process. The impediment goes deeper than that: res judicata may sustain a plea of abuse of process but in that case the appropriate remedy is to strike out the later action: Greenhalgh v Mallard [1947] 2 All ER 255 at 257; Dallal v Bank Mellat [1986] QB 441 at 451-454. So long as the respondent chooses, as he does, to take no step to set aside the judgment and to raise no issue in the second action as to the circumstances in which that judgment was obtained, he must accept the consequences of res judicata."

34 And, further, their Honours said at [24]; 511:

"But more fundamentally, the respondent sued the appellant on a cause of action for which he received judgment, then, without seeking to have that judgment set aside or otherwise to impugn it on the ground that it had been entered or obtained by mistake, sought to sue again in respect of the same cause of action."

Resolution

35 Mr Hutley does not dispute these principles. He does not rely on the exception in the "slip rule" in the Uniform Civil Procedure Rules 2005, Pt 36 r 36.17. Nor does he seek to set aside the consent orders under Pt 36 r 15 (order or judgment given, entered or made irregularly, illegally or mala fide ). He submits that the application is premature because the remaining parts of the amended notice of motion in the 2007 proceedings and the statement of claim in the 2011 proceedings must proceed to a hearing and it is there that the matter should be resolved.

36 Mr Hutley concedes that whilst it is arguable that the 2011 proceedings are too broad in the sense that they include an attempt by Tamar Beck to re-litigate the issues relating to the Zipor dividends, which issues were the subject of the 2007 proceedings, this only means that the applicants would have a partial defence to the 2011 proceedings and does not provide a basis for striking out or staying the 2011 proceedings relating to the additional Zipor dividends.

37 If the 2011 proceedings are too broad they ought to be struck out. Otherwise costs will be incurred by Amiram Weinstock and the other defendants to meet an application for leave to re-open the 2007 proceedings with respect to the issues raised in paragraphs 34 to 46 of the amended statement of claim and judgment on those issues.

38 Likewise, costs will be incurred unnecessarily in preparing to meet paragraphs 7 to 31 of the statement of claim in the 2011 proceedings mirroring almost exactly the factual allegations to support the Zipor claim in the 2007 proceedings.

39 It was submitted that the applicants were asking the court to assume the true construction of clause 1(c) of the consent orders. That is not so, in my view. No challenge was made to the declaratory relief sought by Tamar Beck in the 2007 proceedings or in the 2011 proceedings. The strike out or stay applications were based on res judicata and the finality of orders once entered irrespective of the outcome of the declaratory relief.

40 It was submitted that the applicants were relying upon an agreement of the parties rather than the dismissal of that aspect of the proceedings and it did not matter what Tamar Beck's counsel said when Hamilton AJ was asked to make the consent orders.

41 I agree with the latter submission. If the consent orders did not settle all issues between the parties apart from the redeemable preference question, what counsel said would not prevent further litigation with respect to the non-settled issues in the absence of reliance upon what was said to the detriment of another party.

42 But I do not accept the former proposition. The cause of action merged in the judgment and it is immaterial that the judgment was obtained by consent orders, as the plurality said in Chamberlain at [15]; 508. The principle of res judicata holds good with respect to a judgment entered by consent.

43 It was submitted that, while the consent orders were intended to dispose of the specific issues raised by Tamar Beck in the 2007 proceedings, that did not necessarily mean that the parties also intended that Tamar Beck would be prevented from litigating the issues relating to the additional Zipor dividends disclosed before the consent orders were made. I reject that proposition. In the absence of an application to set aside, the entry of the consent orders foreclosed Tamar Beck's entitlement to commence proceedings with respect to those dividends.

44 Reference was made to Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334, the case that decided that for the purposes of the Trade Practices Act 1974 (Cth) a State was not a person. At [57]; 360 it was said that once an issue is determined at the interlocutory stage and the trial continues, the trial judge's hand is tied in respect of all matters of fact and law involved in the determination.

45 That is not the case here. There is no interlocutory determination of fact or law with respect to those portions of the pleadings in both proceedings that are not stayed or struck out.

46 Mr Hutley asks where do the consent orders deal with the additional Zipor dividends? That is beside the point. Some of them are contained in Annexure "B". The ones that are not, the trial judge may be persuaded are covered by clause 1(c). They may be the subject of redress in the warranty claim under clause 8. But if the trial judge decides they are not covered under the consent orders, the claim for redress with respect to them merged in a judgment denying that redress.

47 Reference was made to Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235 in which it was held that a settlement concluded in accordance with authority reluctantly given could not be the subject of the court's discretion to set aside the compromise or intercept formal judgment. At [9]; 243 the court said:

"But in the case of a compromise which is made within the actual as well as apparent authority of counsel a court does not appear to possess a discretion to rescind it or set it aside. The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it."

48 That has no application to the present case. It is not an application to set aside the consent orders.

49 To accede to the applications to strike out or stay will not deprive Tamar Beck of the opportunity to obtain redress with respect to the additional Zipor dividends. She has the declaratory relief claim and she has the breach of warranty argument.

50 On the other hand, to reject the applications will put an unnecessary burden upon Amiram Weinstock to prepare to meet a reopening of the issues finally determined by the consent orders.

51 A case of res judicata has been made out and the appropriate course is to strike out paragraphs 3 to 7 of the amended notice of motion in the 2007 proceedings and paragraphs 7 to 31 of the statement of claim in the 2011 proceedings. It is inappropriate, in my view, to stay those allegations for the spectre of a reopening would remain. Tamar Beck must pay the costs.

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Decision last updated: 11 October 2011