Court of Appeal
Supreme Court
New South Wales

Medium Neutral Citation:

Beck v Weinstock; Beck v L W Furniture (Consolidated) Pty Ltd [2012] NSWCA 289

Hearing dates:

10 July 2012

Decision date:

13 September 2012

Before:

McColl JA at [1]
Campbell JA at [2]
Meagher JA at [83]

Decision:

In matter 2007/287773

(1) Grant leave to appeal.

(2) Direct the Applicant to file a Notice of Appeal in the form of the draft contained in the White Book within 14 days.

(3) Appeal allowed.

(4) First, Second and Third Respondents to pay the costs of the Applicant of the application for leave to appeal and the appeal.

(5) Respondents to have a certificate under the Suitors' Fund Act 1951 if qualified.

(6) Direct the parties to consult on the orders required to strike out those parts of the Amended Notice of Motion that the Applicants have accepted in argument should be struck out, and amend the Amended Notice of Motion to reflect the striking out and amendments to the Statement of Claim in the 2011 Proceedings that the Applicants have accepted in argument should be made, and

(a) within ten days of the making of these orders file and provide to the Associate of each judge who has heard this matter in this Court an agreed minute of the order to give effect to this direction, with a draft of the Amended Notice of Motion as so amended attached, or

(b) within 14 days of the making of these orders each party file and provide to each such Associate his her or its respective contentions (not exceeding three pages) and draft order concerning the order that should be made to give effect to this direction.

(7) Reserve further consideration of the order that should be made pursuant to the preceding direction.

In matter 2011/11682

(1) Grant leave to appeal.

(2) Direct the Applicant to file a Notice of Appeal in the form of the draft contained in the White Book within 14 days.

(3) Appeal allowed.

(4) Respondents to pay the costs of the Applicant of the application for leave to appeal and the appeal.

(5) Respondents to have a certificate under the Suitors' Fund Act 1951 if qualified.

(6) Direct the parties to consult on the orders required to strike out those parts of the Statement of Claim that the Applicants have accepted in argument should be struck out,

(7) Reserve further consideration of the order that should be made pursuant to the preceding direction.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

JUDGMENTS AND ORDERS - res judicata - consent judgment entered in relation to a series of disputed dividends - terms of consent judgment did not cover certain further dividends - statement of claim filed in relation to further dividends - defendant sought strike-out of allegations relating to dividends because they related to a res judicata - a party is prevented by a res judicata from agitating of actions merged in a consent judgment, but only where the consent judgment is actually a judgment or order of the court - longstanding practice of the court to enter into record documents described as judgments or orders that contain material that is not part of the judgment or orders - consent orders in this case took the form of the Court noting the effect of an agreement reached inter partes - Court did not make further orders dismissing the action - thus proceedings terminated otherwise than through a mandatory or prohibitive judicial decision and there was no res judicata which prevented the institution of proceedings relating to the contested dividends - strike-out refused

JUDGMENTS AND ORDERS - consent orders - construction - whether surrounding circumstances can be used as an aid to the construction of consent orders - where consent judgment contained no order that proceedings "be otherwise dismissed" - whether the dismissal of all claims relating to dividends is implicit in the judgment by consent, notwithstanding lack of express order - proper question of construction must be determined at first instance

WORDS AND PHRASES - "res judicata", "judgment", "consent judgment"

Legislation Cited:

Suitors' Fund Act 1951
Supreme Court Act 1970
Workmens Compensation Act 1906 (UK)

Cases Cited:

Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58
Beck v Weinstock [2010] NSWSC 1068; (2010) 241 FLR 235
Beck v Weinstock [2011] NSWSC 1195
Beck v Weinstock [2012] HCA Trans 34
C G Maloney Pty Ltd v Noon [2011] NSWCA 397
Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1987-1988) 164 CLR 502
Dinch v Dinch [1987] 1 WLR 252
Henderson v Henderson (1843) 3 Hare 100
In re South American and Mexican Co, ex parte Bank of England [1895] 1 Ch 37
Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567
Lee v NSW Crime Commission [2012] NSWCA 262
Masterton Homes Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382
Nokia Corporation v Liu [2009] FCAFC 138; (2009) 179 FCR 422
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Weinstock v Beck [2011] NSWCA 228; (2011) 252 FLR 462

Texts Cited:

Parker's Practice in Equity (NSW), 2nd ed
Neville & Ashe, Equity Proceedings With Precedents (NSW)
Seton's Judgments and Orders, 7th ed
Spencer-Bower, The Doctrine of Res Judicata (1924)
Spencer-Bower and Turner, Res Judicata, 2nd ed (1969)
Spencer Bower, Turner and Handley The Doctrine of Res Judicata, 3rd ed (1996)

Category:

Principal judgment

Parties:

In Matter 2007/287773

Tamar Rivqa Beck (Applicant)
Amiram David Weinstock (First Respondent)
Helen Weinstock (Second Respondent)
Zipor Pty Limited (Third Respondent)
Michael Victor Henley (Fourth Respondent)

In Matter 2011/111682

Tamar Rivqa Beck (Applicant)
L W Furniture (Consolidated) Pty Ltd (First Respondent)
Amiram David Weinstock (Second Respondent)
Helen Weinstock (Third Respondent)

Representation:

Counsel:
J Gleeson SC; G Colyer (Applicant)
I M Jackman SC; S M Nixon (Respondents)
Solicitors:
In Matter 2007/287773

McCabes Lawyers Pty Ltd (Applicant)
Baker & McKenzie (First, Second & Third Respondent)
Friedman Lawyers (Fourth Respondent)

In Matter 2011/111682

McCabes Lawyers Pty Ltd (Applicant)
Baker & McKenzie (Respondents)

File Number(s):

2007/287773; 2011/11682

Publication restriction:

Decision under appeal

Citation:

Beck v Weinstock; Beck v LW Furniture (Consolidated) Pty Ltd [2011] NSWSC 1195

Date of Decision:

2011-10-11 00:00:00

Before:

Gzell J

File Number(s):

2007/287773; 2011/111682

Judgment

1McColl JA: I agree with Campbell JA's reasons and the orders his Honour proposes.

2CAMPBELL JA:

Nature of the Proceedings

3The Applicant, Ms Tamar Beck, is the daughter of the late Leo Weinstock and the late Hedy Weinstock. One of the Respondents, Mr Amiram Weinstock, is the brother of the Applicant. His wife is Mrs Helen Weinstock. Without intending any disrespect in doing so, I shall refer to the members of the Weinstock family as "Leo", "Hedy", "Tami", "Ami" and "Helen".

4During his lifetime, Leo had been responsible for the creation of several companies, including Zipor Pty Ltd ("Zipor"), LW Furniture Consolidated Pty Ltd ("Consolidated") and LW Furniture Consolidated (Aust) Pty Ltd ("LWFC Aust").

5Ami was appointed as sole executor of Leo's estate. Ami, Tami and Mr John Halliday, an accountant, were appointed as executors of Hedy's estate. They obtained the appropriate respective grants of probate to give effect to their appointments.

6Tami and Alem Pty Ltd ("Alem"), a company with which she was associated, began proceedings in the Equity Division of the Supreme Court of New South Wales in 2007 ("the 2007 Proceedings"). By the time those proceedings were listed for hearing there were five defendants - Ami, Helen, Zipor, LWFC Aust and Mr Halliday. The 2007 Proceedings alleged that the defendants had been involved in various kinds of breach of duty relating to companies in which Leo and Hedy had had interests and certain assets of Leo and Hedy's respective estates.

7Many of the claims that were made in the 2007 Proceedings were settled on the terms of a document ("the Consent Orders") in accordance with which Hamilton AJ noted agreements and made orders on 16 September 2010. Those notes and orders were entered on 1 December 2010. Some of the orders made pursuant to the Consent Orders revoked the grants of probate in Leo's estate and Hedy's estate, and appointed Mr Michael Henley as administrator cta of each estate.

8In April 2011, Tami and Alem filed an Amended Notice of Motion in the 2007 Proceedings. It sought to add Mr Henley as a defendant. It also sought a declaration as to the proper construction of part of the Consent Orders, and alternatively certain orders aimed at permitting Tami and Alem to obtain the court's determination concerning some of the claims that had been made in the 2007 Proceedings.

9Also in April 2011, Tami began fresh proceedings in the Equity Division of the Supreme Court of New South Wales ("the 2011 Proceedings"). The defendants in those proceedings overlapped with, but were not identical to, the defendants in the 2007 proceedings. Ami, Helen and Zipor were defendants in both the 2007 Proceedings and the 2011 Proceedings. However, two of the defendants in the 2007 Proceedings, namely Mr Halliday and LWFC Aust, were not named as defendants in the 2011 Proceedings. Two of the defendants in the 2011 Proceedings, namely Consolidated and Mr Henley, had not been named as defendants in the 2007 Proceedings.

10It is now common ground that Zipor had declared dividends in each of the financial years ending on 30 June 2004, and 2006-2010 inclusive. On one arguable construction of the 2010 Consent Orders, Tami acquired either no rights at all, or rights of a limited kind, concerning the dividends that had been declared in the financial years 2007-2010 inclusive ("the Zipor Additional Dividends"). The combined objective of the Amended Notice of Motion in the 2007 Proceedings, and the 2011 Proceedings, was to establish, either as a matter of construction of the Consent Orders or by litigation, that Tami had extensive rights concerning the Zipor Additional Dividends.

11Ami and Helen filed a Notice of Motion in the 2007 Proceedings on 29 April 2011, seeking (relevantly) an order that paragraphs 3-7 of the Amended Notice of Motion filed by Tami on 6 April 2011 in the 2007 Proceedings, be struck out or alternatively stayed.

12Consolidated, Ami and Helen also filed a Notice of Motion on 29 April 2011 in the 2011 Proceedings, seeking orders that certain paragraphs of the Statement of Claim filed in the 2011 Proceedings, and certain paragraphs of the prayers for relief in that Statement of Claim, be struck out.

13Those two Notices of Motion were heard together, and Gzell J dealt with both of them in a single set of reasons for judgment. His Honour held that the paragraphs in question of the Notice of Motion that Tami filed in the 2007 Proceedings, and of the Statement of Claim in the 2011 Proceedings, should all be struck out, because they sought to raise issues that were the subject of a res judicata: Beck v Weinstock [2011] NSWSC 1195.

14Tami has filed applications for leave to appeal against the orders in the court below. On the hearing of the applications for leave to appeal the court heard the argument that would be presented if leave to appeal were to be granted.

Issues in the 2007 Proceedings

Undisputed Facts in the 2007 Proceedings

15Some background facts were admitted on the pleadings in the 2007 Proceedings. In October 1995, Hedy granted Leo and Ami a joint and several enduring Power of Attorney. In late 1995, Hedy was diagnosed with Alzheimer's disease. She was in full-time care since 1996 and by at least 29 July 2003 had experienced a total loss of capacity.

16Leo died on 29 July 2003. At the time of his death, the shares in Zipor were held as follows:

"(a) Four "A" class shares which were the only shares entitled to vote but have no dividend or surplus capital participation, which were held as to two "A" class shares by Leo and as to two "A" class shares by Hedy;

(b) Two "B" class shares which were entitled to dividends and entitled to surplus capital on liquidation or winding up of the company, which were held as to one "B" class share by Leo and as to one "B" class share by Hedy;

(c) 1000 "C" class shares which held an entitlement to dividend only, held as to 1000 shares by [Consolidated].

17On 21 October 2003, Ami, acting under Hedy's Power of Attorney, transferred one "A" class share in Zipor to Helen for a total consideration of one dollar.

18Hedy had made a will on 21 February 1996, which was the last will that she made before her death on 6 July 2004. Broadly, that will divided her estate equally between Ami and Tami.

19On 15 June 2001, Leo had entered into a Call Option Deed with Ami. Under it, Ami was entitled to require Leo to sell certain Option Shares to him or his nominee at any time during the Term. The Term was the period beginning on the date of Leo's death and ending four months after Leo's death. The Option Shares included two "A" and one "B" class share in Zipor, and five "A" convertible preference shares in Consolidated. Ami purported to exercise the Call Option on 28 November 2003, which was during its term. The combined effect of his exercising the option, and transferring Hedy's "A" class share in Zipor to Helen was that, between them, Ami and Helen held three-quarters of the voting shares in Zipor.

Other Allegations in the 2007 Proceedings

20The Amended Statement of Claim in the 2007 Proceedings made some allegations that were disputed, not admitted, or nor admitted in totality by the defences that Ami and Helen filed. One of those allegations was that the various Option Shares had been transferred to Ami at a value that significantly understated the value that they would have had on a correct application of the pricing formula in the Option Deed.

21Another group of allegations was made in paragraphs 34-47. Their theme was that the transfer of one of Hedy's "A" class shares in Zipor to Helen was at an undervalue, and otherwise in breach of Ami's fiduciary duty to Hedy concerning the exercise of powers under the Power of Attorney. Part of the basis upon which Tami contended that the transfer of the shares in Zipor, both pursuant to the Power of Attorney and pursuant to the Option Deed, was at an undervalue was that an amount in excess of $4.4 m was held in a Swiss bank account by or on behalf of Zipor ("the Zipor Swiss Money") , and had not been taken into account in calculating the value of the Zipor shares for the purpose of the respective transfers.

22The Amended Statement of Claim pleaded that the effect of transferring the "A" class share in Zipor to Helen was that Ami delivered control of the general meeting of Zipor to himself and Helen. In particular, it pleaded that the transfer gave Ami and Helen power to declare dividends on behalf of Zipor for the benefit of Consolidated, a company which Ami controlled, and thereby to appropriate the majority of the Zipor Swiss Moneys to Consolidated, and thus deplete the value of Hedy's estate, with consequent detriment to Tami as a beneficiary of Hedy's estate.

23The Amended Statement of Claim in the 2007 Proceedings also alleged, at para 41:

"Following the transfer of Hedy's one "A" class share to Helen in Zipor, Ami and Helen exercised their purported power as shareholders of Zipor to declare dividends as follows:

(a) in the year ended 30 June 2004, a dividend of $3,683,752.80 with franking credits of $1,578,751.20, of which $3,676,400 with franking credits of $1,575,600 was payable to [Consolidated]; and

(b) a dividend on 10 May 2006 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 [Consolidated]."

At the hearing before us it was common ground that under the Articles of Association of Zipor it is the shareholders who have the power to declare dividends.

24While the defences disputed some details of the allegation in para 41 of the Amended Statement of Claim, the nub of it was admitted. One matter that was denied was that it was following the transfer of Hedy's one "A" class share to Helen that Ami and Helen exercised their power as shareholders to declare the dividends. A possible explanation for that denial is that the dividend for the year ended 30 June 2004 appears to have been declared on 17 November 2003, at a time when Ami still held two "A" class in Zipor in his capacity as executor of Leo's estate.

25The 2007 Amended Statement of Claim pleaded at para 44 that the following consequences arose from Ami's alleged breach of fiduciary duty in transferring the "A" share in Zipor to Helen:

(a) The "A" class share in Zipor transferred to Helen on 21 October 2003 would not have been transferred unless Helen paid the sum of at least $9,789,710 to Hedy for the purchase of her one "A" class share in Zipor on 21 October 2003, thus augmenting the value of Hedy's Estate upon her death on 6 July 2004;

(b) Further or alternatively to (a) above, neither of the dividends referred to in paragraph 41 above would have been declared by Zipor, with the consequence that the value of Hedy's shares in Zipor would not have been diluted by the declaration of either of those dividends, or by the disbursement of any entitlement which Zipor had to the Zipor Swiss Moneys as a consequence of the declaration of the dividends; and

(c) By reason of (a) and/or (b) above, the value of Tami's share in Hedy's Estate would have been greater than is the case as a consequence of the declaration and payment of those dividends."

26It alleged that Ami's conduct had caused Hedy's estate to suffer loss and damage, which was particularised at para 45 as:

"The sum of $9,809,289.60 being the amount of the dividends paid and franking credits distributed by Zipor referred to in paragraph 41 above."

27Alternatively, it pleaded that Ami was obliged to give restitution to Tami for the loss suffered by her as a consequence of Ami's alleged breach of fiduciary duty in transferring the Zipor "A" share to Helen. That loss was particularised at para 46 as:

"One half share in the sum of $9,789,710 paid by Helen for the transfer of the "A" class share to her on 21 October 2003 - namely $4,894,855, or alternatively one half share in the value that Hedy's "B" class share in Zipor would have had if neither of the dividends referred to in paragraph 41 above had been declared - namely $2,336,470."

28Paragraph 47 of the Amended Statement of Claim went on to plead:

"Helen holds the "A" class share in Zipor on trust for Hedy's Estate, having acquired that share for $1, by reason of the exercise of Hedy's Power of Attorney by Ami, with knowledge that the transfer had been made by Ami in breach of his fiduciary duty referred to in paragraph 43 above."

29The claims for relief in the 2007 Amended Statement of Claim included:

"1. Damages

2. Equitable compensation

3. 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 (the Third Defendant) by the [Ami] as attorney for [Hedy] to [Helen] on 21 October 2003.

...

6. Further or alternatively, a declaration that the value of the "A" class share of [Hedy] in [Zipor] transferred to [Helen] on 21 October 2003 was $9,789,710 and not $1 and an order that the difference be paid to the estate of Hedy by such date as the Court shall think fit.

7. Further or alternatively, a declaration that [Helen] holds on trust for Hedy's Estate one "A" class share in Zipor.

8. 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."

The Consent Orders

30The Consent Orders provided for Ami to transfer to the Leo Estate all the Option Shares that he had acquired (apart from shares in three listed companies, concerning which he was required to account to Leo's Estate). They required Helen to execute the necessary documents to transfer the "A" class share in Zipor to Hedy's Estate. Hedy and Alem acknowledged that the Zipor Swiss Moneys were beneficially owned by Zipor. The grants of probate in both Leo's Estate and Hedy's Estate were revoked, and Mr Henley was appointed administrator CTA of both estates. Certain other disputes were also settled. Orders were made that dealt exhaustively with the costs that had been incurred in the proceedings up to the time of the making of the Consent Orders.

31However, the Consent Orders did not dispose of all the claims that had been made in the Amended Statement of Claim. One group of disputes that they did not dispose of concerned whether certain shares in Consolidated were redeemable preference shares, and whether they had been validly redeemed. Those disputes related to relief claimed in paragraphs 9A, 9B and 9C of the Amended Statement of Claim. Those disputes have now been litigated at first-instance (Beck v Weinstock [2010] NSWSC 1068; (2010) 241 FLR 235), and in this Court (Weinstock v Beck [2011] NSWCA 228; (2011) 252 FLR 462). On 10 February 2012, the High Court of Australia granted special leave to appeal from this Court's decision (Beck v Weinstock [2012] HCA Trans 34), but that appeal has not yet been heard. Central issues in the present applications concern whether there were other disputes that the Consent Orders did not dispose of, and the precise mechanism by which the Consent Orders disposed of disputes.

32The provisions of the Consent Order of greatest importance for the present application are:

"1. Within 14 days [Ami]:

....

(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 [Ami] transfers the shares referred to in (a) to the Leo Estate.

....

5. The Court notes that [Consolidated] agrees to pay [Zipor] within 120 days the amount which it received as a dividend from [Zipor]:

(a) $3,676,400.00 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 [Consolidated] loan account arises, whichever is earlier.

6. The Court notes that the Leo Estate agrees to pay to [Zipor] within 30 days the amount which it received as a dividend from [Zipor] being:

(a) $3,676.40 received on 17 November 2003; and

(b) $3,176.40 received on 5 June 2006

plus interest at Court rates.

7. The Court notes that the Estate of Hedy Weinstock agrees to pay to [Zipor] within 30 days the amount which it received as dividend from [Zipor] being:

(a) $3,676.40 received on 17 November 2003; and

(b) $3,176.40 received on 5 June 2006

plus interest at Court rates.

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

(a) [Ami], [Helen] and [Consolidated] (by its directors, [Ami] and [Helen]) 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 [Tami] 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

33It is apparent that Annexure B disclosed dividends totalling $1,001,000, made in the financial years 2007-2009 inclusive, concerning which clauses 5, 6 and 7 of the Consent Orders made no promise to repay.

34To understand clause 1(c) of the Consent Orders, the shares referred to in clause 1(a) were the Option Shares that Ami had acquired from the Leo Estate, other than the shares in the three listed companies. Thus, those shares included the "A" and "B" class shares in Zipor that had been transferred to him pursuant to the exercise of the option.

35The only express dismissal of claims contained in the Consent Orders was a dismissal of a claim that Alem made for compensation that had been pleaded in paragraphs 58-73 of the Amended Statement of Claim, and (apart from two matters concerning which Tami and Ami had reached an agreement) a cross-claim filed by Ami was dismissed. The final order was:

"Grant liberty to any party and to Henley to apply on reasonable notice in relation to the implementation of these orders."

Some Facts Giving Rise to the 2011 Litigation

36The 2007 Proceedings were set down for a final hearing, which was to commence before Hamilton AJ on 13 September 2010. The Consent Orders were negotiated in correspondence between solicitors shortly prior to 13 September 2010 and in discussions between legal representatives during the time that had been allocated for the hearing. The judge permitted the parties to spend some of that time in discussions. The detail of those discussions has not been investigated in litigation so far, but it appears that it was in the course of them that the table that came to be included as Annexure B of the Consent Orders was provided by those on Ami's side of the litigation, to those on Tami's side of the litigation.

37Since the negotiation of the Consent Orders it has become common ground that Zipor declared a dividend in the 2010 financial year, that was not referred to in Annexure B. Pursuant to that declaration of dividend, Consolidated was paid $250,000, and Ami and the estate of Hedy were paid $250 each.

Tami's Amended Notice of Motion in the 2007 Proceedings

38Tami's 2011 Amended Notice of Motion in the 2007 Proceedings sought the following orders:

"1. Leave to join Michael Victor Henley, in has 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 [Ami] is obliged to account to the Leo Estate for all dividends that he, [Helen] and [Consolidated] 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 out 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 of Claim. Including:-

(a) Damages;

(b) Equitable compensation;

(c) 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 [Tami] as attorney for [Hedy] to [Helen] on 21 October 2003;

(d) 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 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 [Tami] 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.

39At the hearing before Gzell J, the Respondents sought and obtained an order that paragraphs 3-7 inclusive of this Notice of Motion be struck out. At the hearing at first instance the then counsel for Tami did not seek to support paragraphs 3 and 7 remaining in the Notice of Motion. Thus, the substance of the debate on the present application concerns the correctness of striking out paragraphs 4, 5 and 6 of that Notice of Motion. Mr Gleeson SC, counsel for Tami in these applications, accepts that certain drafting changes would be needed to paragraphs 2, 4, 5 and 6 of the Notice of Motion if in principle the orders below were to be overturned.

The 2011 Statement of Claim

40The relief claimed in the 2011 Statement of Claim was:

"1. A declaration that upon the proper construction of the agreement noted in paragraph 5 of the consent orders made in Supreme Court Proceedings 2007/287773 on 16 September 2010 [the Consent Orders] [Consolidated] is obliged to account to [Zipor] for all dividends that it received from that company, including the dividends declared as shown on Annexure "B" to the Consent Orders and the dividend declared on 1 May 2010 [the LWFC Zipor Dividends].

2. Alternatively, an order that the agreement noted in paragraph 5 of the Consent Orders be rectified or, alternatively, varied pursuant to section 87 of the Trade Practices Act by:-

(a) changing "amount" to "amounts"; and

(b) changing "being" to "including".

3. A declaration that the plaintiff is entitled to have the Agreement in paragraph 1 or 2 (as the case may be) specifically performed.

4. An order that the agreement referred to in paragraphs 1 or 2 (as the case may be) be specifically performed and carried into effect.

5. Directions as to the implementation of order 3 and 4.

6. Damages.

7. Equitable compensation.

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.

10. Interest under section 100 of the Civil Procedure Act.

11. Costs.

Allegations in 2011 Statement of Claim

41At the hearing before Gzell J, the then Senior Counsel for Tami did not oppose the striking out of paragraphs 14, 15, 16, 17, 20, 24(c), 25(a) and (b) and words at the conclusion of paragraph 28(b) beginning with the words "or by the disbursement of any entitlement". The text of the remaining paragraphs that the judge struck out is very closely modelled on the text of certain paragraphs selected from paras 7-47 in the 2007 Amended Statement of Claim. Indeed, the wording is identical, apart from the allegations being altered to extend the claims made to cover the Zipor Additional Dividends, and some inconsequential drafting changes. The Schedule to this judgment sets out more precisely the differences.

42Paragraphs 32-36 of the 2011 Statement of Claim were not struck out. Those paragraphs allege, in summary,

(a) A breach by Consolidated of an agreement to repay to Zipor "any amount it had received as a dividend from Zipor since October 2003". The dividends alleged not to have been repaid are all the dividends declared from 2004-2010 inclusive. Without seeking to be exhaustive about the issues likely to arise from that allegation, it is clear that there will be an issue about whether the Consent Orders, properly construed, required Consolidated to repay to Zipor the Zipor Additional Dividends.

(b) In the negotiations leading to the Consent Orders, those on Ami's side of the dispute represented that repayment of the 2003 and 2006 dividends would give Tami all she was seeking concerning the Zipor dividends, and that no further dispute remained in respect of those dividends. The 2011 Statement of Claim contends that that representation was a continuing one, which was never withdrawn, and that Tami relied on it. On the basis of it, Tami seeks three alternative types of equitable relief:

(i) an estoppel against Ami and Consolidated contending that clause 5 of the Consent Orders on its true construction requires Consolidated to repay anything less than all the amounts it has received as a dividend from Zipor;

(ii) rectification of clause 5, in the manner pleaded in para 2 of the claims for relief in the 2011 Statement of Claim ([40] above), to bring about the effect that it requires Consolidated to repay all dividends on the basis that that was the common intention of the parties who agreed to the Consent Orders; or

(iii) the same rectification, based upon Tami alone understanding that the clause required payment of all dividends paid by Zipor to Consolidated, which belief was induced by Ami and Consolidated, and not corrected by them although they knew Tami had that understanding.

(c) Breach of a warranty, contended to have been given on 16 September 2010 by Ami, Helen and Consolidated, that the only benefits received by them or any of them were as disclosed in orders 5-7 inclusive and Annexure B of the Consent Orders. The warranty bears a relationship, the nature of which is not altogether clear from the pleading, to paragraph 8 of the Consent Orders. The warranty is alleged to have been breached by Consolidated, Ami and Helen having received the 2010 dividends from Zipor.

(d) The substance of the warranty claim is recast as a representation in trade or commerce, that was false and misleading, giving rise to an entitlement on Tami to have the agreement on which her breach of warranty claim was based, or alternatively the agreement noted in paragraph 8 of the Consent Orders, set aside or varied so as to include all the benefits received by Ami, Helen and Consolidated.

The Judgment Appealed From

43The primary judge observed, at [24], that paragraphs 7-31 of the 2011 Statement of Claim "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." Mr Gleeson submits that that statement is erroneous, because it overlooks the significant difference that arises from the 2011 pleading making specific claims, concerning the Additional Zipor Dividends, that had not been made in the 2007 pleading. Mr Gleeson is right in saying that the addition of claims concerning the Zipor Additional Dividends is a significant difference between the 2007 Amended Statement of Claim and the 2011 Statement of Claim. However, in light of the other textual similarities between the two documents, and the imprecision of the statement that the paragraphs in question from the 2011 Statement of Claim were "almost identical", I would not conclude that the judge's statement was erroneous.

44The judge referred to familiar and uncontentious authority for the propositions that:

(1) A judgment entered by consent can give rise to a res judicata, though the fact that the judgment is entered by consent "may on occasion make it hard to say what was necessarily decided by the judgment": Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1987-1988) 164 CLR 502 at [15] per Deane, Toohey and Gaudron JJ.

(2) When a judgment of a court is obtained on a cause of action, the rights that make up that cause of action merge in the judgment, and cease to exist for as long as the judgment stands, making it impossible to bring later proceedings on the same cause of action for so long as the judgment continues in existence: Chamberlain at [21], [24].

45The primary judge noted a concession by counsel for Tami that the 2011 Proceedings were too broad "in the sense that they include an attempt by [Tami] to re-litigate the issues relating to the Zipor dividends, which issues were the subject of the 2007 Proceedings". The concession, as contained in the written submissions of Tami's counsel, was that it was arguable that the 2011 Proceedings were too broad, in that they "apparently include an attempt by Tami to re-litigate the issues relating to the two Zipor dividends, which issues were definitely the subject of the 2007 proceedings". Counsel had submitted that the consequence of the 2011 Proceedings being too broad in that respect was that the applicants would have a partial defence to the 2011 Proceedings, and that having that partial defence did not provide a basis for striking out or staying the 2011 Proceedings relating to the Additional Zipor Dividends. The judge continued, at [37]-[38]:

"If the 2011 proceedings are too broad they ought to be struck out. Otherwise costs will be incurred by [Ami] 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.

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."

46If by these remarks the judge meant that it was inappropriate for the 2011 Proceedings to make allegations and seek relief relating to the 2003 and 2006 dividends, if Tami was not seeking any further relief concerning those dividends than she had already obtained in the Consent Orders, the judge's remark is unexceptional. However, a striking out on that basis would properly be accompanied by leave to re-plead, so that the allegations made in the 2011 Proceedings related only to the real matters that continued to be in dispute. The basis on which the primary judge struck out the paragraphs in question without leave to re-plead was that he found that there was a res judicata that prevented the claims made in the paragraphs from being litigated.

47At the time that Hamilton AJ was asked to make the Consent Orders, Tami's then counsel said to him that the Consent Orders "resolve or deal with the resolution of the other issues in the case", apart from the questions relating to the redeemable preference shares ([31] above). Gzell J held that that statement was irrelevant:

"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."

48Mr Jackman SC, counsel for the Respondents in this Court, takes no issue with that proposition.

49The order in paragraph 1(c) of the Consent Orders would to some extent require Ami to take action concerning dividends paid on Zipor shares. There is a live question of construction about the extent of the obligation that it imposes upon Ami concerning dividends paid by Zipor. The question of construction has been raised by para 2 of Tami's Amended Notice of Motion in the 2007 Proceedings ([38] above), which the Respondents accept must be decided by the Court following a hearing. Save for that at present unresolved dispute about the scope of operation of clause 1(c) concerning dividends paid by Zipor, the only provisions contained in the Consent Orders relating to Zipor dividends are paragraphs 5-8 inclusive.

50Many of the provisions of the Consent Orders took the form of the Court ordering that certain things be done, or the Court pronouncing an order that was in itself effective to achieve a result (such as the order that the grant of probate of the Leo Estate to Ami "is revoked effective from the date these orders are made"). However, paragraphs 5-8 inclusive all took the form of the Court noting agreements. Insofar as clause 5 noted an agreement on the part of Consolidated, it was noting an agreement by a company that was not a party to the litigation.

51Further, the agreements recorded in paras 5-8 were all in terms that a court could not have ordered if the 2007 Proceedings had been litigated on the pleadings as they then stood. Nothing in the claims for relief in the 2007 Proceedings sought that Consolidated pay anything to Zipor, or that Leo's estate pay anything to Zipor, or that Hedy's estate pay anything to Zipor. Nothing like the warranty in clause 8 of the Consent Orders was sought in the Amended Statement of Claim. As well, the order made in terms of clause 1(c) of the Consent Orders, requiring that Ami "account" to Leo's estate concerning certain benefits and money, was a type of order that had not been sought in the 2007 Proceedings.

52At [40], the judge noted a submission from Tami's counsel "that the applicants were relying upon an agreement of the parties rather than the dismissal of that aspect of the proceedings". The judge said, at [42]-[43]:

"... I do not accept the ... 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.

It was submitted that, while the consent orders were intended to dispose of the specific issues raised by [Tami] in the 2007 proceedings, that did not necessarily mean that the parties also intended that [Tami] 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 [Tami's] entitlement to commence proceedings with respect to those dividends."

53The primary judge also said, at [46]:

"[Counsel for Tami] 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."

54In my respectful view, the primary judge was mistaken in holding that there was any judgment in which any cause of action relating to dividends declared by Zipor had merged, and which denied the redress that Tami was seeking.

55It has been the long-standing practice of courts to include in documents that are entered in the court's record and entitled "judgments" or "orders", matters which are not, strictly speaking, judgments or orders. Seton's Judgments and Orders, 7th ed (1912) Stevens & Sons Limited says in the introduction at cccxliv:

"In point of form, a judgment or order of the Court, as ultimately drawn up, consists usually of two parts: one, preliminary or introductory, and the other containing the actual adjudication or pronouncement of the Court.

The function of the first or preliminary part of the order is to show the circumstances attending the making of it. Accordingly, in this part is stated briefly the form of the application to the Court, who are the parties appearing, and any consents, waivers or undertakings given by them ...

Judgments and orders in the Chancery Division are, in their second or substantive part, of so varied and often complex a character that no specific rules as to the arrangement of them can be given. There is, however, a generally defined natural order of clauses which is usefully adopted. Thus, any declarations made by the Court as to the rights of the parties naturally precede the accounts and inquiries which are directed in order to ascertain the nature or extent of such rights, or to give effect to them, and these again are followed by consequential directions or specific adjudications inter partes, as for the recovery of money or land, delivery of property, directing the performance of or abstention from any act, any sale, conveyance or other dealing with property, or the lodgment in Court or dealing with funds, and taxation and payment of costs. Where accounts or inquiries are directed, the order concludes by making provision for the further consideration by the Court of any part of the subject-matter which may, on the result of such accounts or inquiries, require such consideration."

56That practice of including in documents that are entered in the Court's records, and referred to as judgments or orders, matter that was not an actual adjudication or pronouncement of the Court was followed in New South Wales before the enactment of the Supreme Court Act 1970. Parker's Practice in Equity (NSW), 2nd ed (1949) Law Book Co of Australasia Pty Ltd at 241 says, in discussing the formal parts of decrees or orders:

"Any undertaking by a party which is intended to be included should be expressed to be made by the party 'by his counsel,' and should in general precede the mandatory part of the decree or order."

57The distinction between such preliminary matters and the "mandatory part" of the decree or order continued to be observed in New South Wales after the introduction of the Supreme Court Act. Neville & Ashe, Equity Proceedings With Precedents (NSW) (1981) Butterworths, gives the following specimen form of order at page 333:

"UPON the plaintiff by his counsel undertaking to the Court that he will use his best endeavours to (describe).

THE COURT NOTES THAT-

1 The parties agree that they will (describe).

2 The defendant by his counsel undertakes to the Court to etc.

THE COURT DECLARES that-

3 (Name) holds the premises known as (describe) upon trust for (name).

THE COURT BY CONSENT ORDERS that -

4 (Names) have possession of the said premises.

THE COURT ORDERS that-

5 The defendant pay the plaintiff's costs.

6 There be liberty to apply."

58Sometimes, if a dispute that has become the subject of litigation is settled, the settlement takes the form of an agreement that the court will make certain orders. Such an agreement is implemented by the parties jointly requesting the court to make those orders, and the court actually making those orders by consent. But disputes are sometimes settled by different mechanisms. One is an agreement between the parties whose commercial substance is not embodied in court orders, and the litigation is brought to an end by a consent order that is quite uninformative about the real commercial basis on which the dispute has been brought to an end, such as an order there be judgment for the defendant with no order as to costs.

59There is a middle course, which was adopted in the present case. If parties to litigation request the court to make certain orders by consent, they can also request the court to note the terms of an agreement between the parties but for that agreement not to result in the court actually ordering anything concerning the subject matter of the agreement. There can be advantages for the parties in having the court note such an agreement - the note in the court records provides excellent evidence of the terms of the agreement, and the fact that the note appears accompanying certain orders of the court can assist in making clear that the agreement bears a relationship to those orders (though the precise nature of any such relationship might need to be established by other evidence).

60However, the fact that a judge notes the agreement, and that note is entered in the court's records, does not change its essential status - it is still an agreement between the parties, not an order of the court. Indeed, sometimes a court is prepared to note an agreement in circumstances where the court would decline to make an order to similar effect, such as when the court notes an agreement that terms of settlement not be disclosed. That distinction between agreements that the court will, if asked, give effect to by itself pronouncing an order, and agreements that the court is willing to note but will not turn into an actual order is recognised in UCPR 36.1A, which provides:

(1) The court may give judgment, or order that judgment be entered, in the terms of an agreement between parties in relation to proceedings between them.

(2) Unless the court, for special reasons, otherwise orders, the court must refuse to give judgment, or order that judgment be entered, in terms that restrict, or purport to restrict, any disclosure of the terms of the judgment or order.

(3) Subrule (2) does not limit the effect of any agreement between the parties that contains provisions that restrict the parties, or purport to restrict the parties, from disclosing the terms of the agreement or of the judgment or order.

61A characteristic of judgments and orders of a court that belong in the mandatory part of the court order is that they take effect through the authority of the court. A court order produces legal consequences through the very fact that it is made by the court. That happened in the present case, when the court made orders that revoked the grants of probate that had been made in Leo and Hedy's estates. It happens when the court gives a judgment that A pay $X to B, where the judgment itself is a source of the liability to pay the $X. A court order that commands that some act be done is itself a source of an obligation to perform that act. Special enforcement procedures appropriate to judgments and orders can be invoked to achieve the effect that the judgment or order is obeyed. By contrast, an agreement inter partes that the court has noted creates obligations that are merely contractual ones, not obligations based in any way on the authority of the court. The enforcement mechanisms available concerning it are the same as would have been available if the agreement had been made, but not noted by the court.

62The basis of res judicata was explained by Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597, in terms later approved by Deane, Toohey and Gaudron JJ in Chamberlain at 507-8:

"The distinction between res judicata (in England called 'cause of action estoppel') and issue estoppel was expressed by Dixon J in Blair v Curran (1939) 62 CLR 464 at 532 in these terms: 'in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. '

The distinction was restated by Fullagar J in his dissenting judgment in Jackson v Goldsmith (1950) 81 CLR 446 at 466. His Honour expressed the rule as to res judicata by saying: 'where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims 'interest reipublicae ut sit finis litium' and 'nemo debet bis vexari pro eadem causa'.' His Honour went on to discuss issue estoppel, citing the comment 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 issue, so that it cannot afterwards be raised between the same parties or their privies.'

...

The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding."

63An agreement that is noted by a court, but does not result in a court order being made that gives the court's authority to the agreement does not result in a res judicata. The first edition of Spencer-Bower, The Doctrine of Res Judicata (1924), Butterworth & Co London, states as follows:

"14. A res judicata is a judicial decision, pronounced by a judicial tribunal. It is of no avail to prove that the alleged res judicata was a decision, or even that it was a judicial one, in the sense that it was pronounced according to judicial principles, unless it be also established that it emanated from a judicial tribunal in the exercise of its judicial functions; nor, on the other hand, is it sufficient to shew that it was pronounced by a judicial tribunal, unless it be also shown that it was a decision, and a judicial one, as distinguished from a termination of the proceedings otherwise than by a judicial decision. ...

23. In order to establish a res judicata on which an estoppel may be founded, it must appear ... that what was pronounced amounted to a judicial decision. There must have been ... a judicium, which for purposes of estoppel means a decision or determination or adjudication of some question of law or fact, whether such decision takes the form of an express judicial declaration, or is necessarily involved in the command or prohibition which constitutes the judgment or judicial in its coercive or operative aspect.

...

33. Any judgment or order which in other respects answers to the description of a res judicata is none the less so because it was made in pursuance of the consent and agreement of the parties. It is true that, in such cases, the court is discharged from the duty of investigating, or (where the consent is given at a late stage in the proceedings) further investigating, the matters in controversy, and is not asked to, and does not, pronounce a judicial opinion upon any of such matters; but it is none the less true also that, at the joint request of the parties, the tribunal gives judicial sanction and coercive authority to what those parties have settled between themselves, and in that way converts a mere agreement which, except in certain special cases the subject of express statutory provision in that behalf, could only operate as an agreement, and not as a bar, into a judicial decision on which a plea of res judicata may be founded. Accordingly, judgments, orders, and awards by consent have always been held no less efficacious as estoppels than other judgments, orders, or decisions, though doubts have been occasionally expressed whether, strictly, the foundation of the estoppel in such cases is not representation by conduct, rather than res judicata.

34. But, 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 is conclusively binding upon, not only the parties , but the rest of the world, 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. Any issue or question which is thus shown to have been recognized or taken by the parties as the subject of the litigation, and of the judgment or order agreed to, is deemed to have been thereby conclusively determined, so as to preclude any subsequent challenge. Where, however, there are no such materials, available as are above indicated, there is nothing which can operate as a decision of any particular question or issue, and neither party is estopped from disputing anything but the actual judgment or order itself." (italics in original, underlining added)

These passages repeatedly recognise the difference between the mandatory or prohibitory part of a judgment, and other parts. What the author meant by "except in certain special cases the subject of express statutory provision in that behalf", in the portion I have underlined from [33] is shown by a footnote to that passage, which gives as an example a provision of the Workmens Compensation Act 1906 (UK). That provision provides that a memorandum of an agreement for compensation, recorded in the prescribed register of the county court, shall be enforceable as a county court judgment. There is no such statutory provision that is relevant to the present case.

64The passages I have just quoted also appear in Spencer-Bower and Turner, Res Judicata, 2nd ed (1969) Butterworths London at [21], [30], [41] and [42]. The passages do not all appear in the more compressed text of Spencer Bower, Turner and Handley The Doctrine of Res Judicata, 3rd ed (1996) Butterworths, but that text at [38] says:

"A judgment or order by consent of the parties may be a res judicata. In such cases the court is discharged from the duty of investigating or further investigating the matters in controversy and does not pronounce a judicial opinion on them; but at the joint request of the parties it gives judicial sanction and coercive authority to what they have agreed and thus converts an agreement which, except by statute, could never operate as a bar into a judicial decision on which a plea of res judicata may be founded. Judgments, orders and awards by consent are as efficacious as those pronounced after a contest, in creating cause of action estoppels and effecting a merger of the causes of action sued on." (underlining added)

65The fourth edition at [2.16] is in substance the same as the passage just quoted from the third edition, though with some stylistic changes.

66The more elaborate discussion in the first and second edition has the advantage of pointing out the way in which not all parts of a document called a judgment or order are "the mandatory or prohibitory part". The quoted extracts from all four editions accept that an agreement that has not been given "judicial sanction and coercive authority" is insufficient to give rise to a res judicata. When an agreement is merely noted by a court, the noting does not give any "judicial sanction and coercive authority" to the agreement.

67If a court makes some orders by consent, notes an agreement between the parties, and one of the orders made by consent is that the proceedings are otherwise dismissed, the order that the proceedings are "otherwise dismissed" can be effective to give rise to a res judicata. The effect of the res judicata arising from that order is that, concerning any cause of action asserted in the proceedings, the plaintiff will have no rights other than those conferred by consent orders that the court has been requested to make and agreements that the court has noted. In the present case, there was no express order that the proceedings be "otherwise dismissed".

68In Dinch v Dinch [1987] 1 WLR 252 Lord Oliver of Aylmerton (with whom the other four Law Lords agreed) considered a divorce case, in which some consent orders had been made for maintenance and financial provision. The question at issue was whether the former wife could seek a property adjustment order of a type that had been sought in her petition but had not been made by the consent orders. His Lordship had accepted, at 260 that:

"subject to the provisions of that section, once the court has either exercised or declined to exercise its power to make such an order in relation to particular property, no further application for an order in respect of that property at least, whether original or by way of variation of an existing order, can be obtained."

69He had also said:

"The issue between the parties is simply and solely one of the proper construction of the consent order." (260),

and

"What is in dispute is whether the consent order in this case was one by which the court either exercised or declined to exercise its jurisdiction under section 24 of the Act to make a property adjustment order." (at 261)

70At 263 Lord Oliver rejected a proposition that "as a matter of general principle and in every case, if an application is made for ancillary relief and, whether consensually or otherwise, no order is made, it is necessarily implicit that the application is dismissed." The reason for this rejection was, at 263:

"It must, in each case, be a question of construction of the particular order under consideration, and whilst I do not dissent from the proposition that a proper caution should be exercised before reaching a conclusion that will effectively preclude a wife from making a further claim for relief, I do not, for my part, derive much help from consideration of where the burden lies. One has, as it seems to me, simply to look at the order and any admissible material available for its construction, and determine what the court intended, or, in the case of the consent order, what the parties intended, to effect by the order. If the conclusion is that what was intended was a final and conclusive once-for-all financial settlement, either overall or in relation to a particular property, then it must follow that that precludes any further claim to relief in relation to that property."

71His Lordship did not say how that preclusion arises, and his statement of principle follows hard upon citations from Henderson v Henderson (1843) 3 Hare 100 at 115, and In re South American and Mexican Co, ex parte Bank of England [1895] 1 Ch 37 at 50. Each of those cases depends on a principle other than res judicata, so the "preclusion" to which his Lordship referred cannot be taken to be one based on res judicata. Particularly is that so when the notion that a court orders something implicitly, rather than by expressly pronouncing the order, is not an easy one to grasp.

72Henderson v Henderson is, of course, the ancestor of the principle confirmed by the High Court in Anshun. That type of preclusion from raising an issue in litigation is based upon avoiding abuse of process, rather than upon any cause of action having merged in a court order. The test laid down in Anshun, at 602, was that this type of preclusion would not arise unless the matter sought to be relied upon 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."

73As Deane, Toohey and Gaudron JJ said in Chamberlain at 509:

"In truth Henderson v Henderson was not concerned with res judicata in its strict sense but rather with its implications when an issue is sought to be raised 'which could and should have been litigated in the earlier proceedings'."

In deciding that question, any facts which bear upon the reasonableness of the conduct in question are admissible, and thus the scope of admissible evidence is wider than the scope of evidence relevant to deciding whether there is a res judicata: C G Maloney Pty Ltd v Noon [2011] NSWCA 397 at [64]-[68].

74In re South American and Mexican Co is, properly understood, a case of issue estoppel rather than true res judicata. It arose when the plaintiff contended that there was an agreement for a debt to be payable by instalments. The first instalment was paid, but the second instalment was not, whereupon the plaintiff began an action for the second instalment. The defendant contended that the agreement in question was subject to a condition that had not been fulfilled, denied liability to pay the second instalment, and cross-claimed for the return of the first instalment. Judgment by consent was entered for the full amount of the second instalment, and for dismissal of the cross-claim. The defendant then went into liquidation without having paid the second instalment. The plaintiff sought to prove for its entire debt, minus the first instalment and some interest received. The liquidator rejected its proof of debt, on a basis that was the same as the debtor had advanced in the defence to the action. The litigation that is the subject of the report concerned a successful appeal against the liquidator's rejection of the proof of debt. Importantly, there was a concession during argument that the plaintiff was entitled to prove for the second instalment ([41]). Thus, the live dispute related only to the third and fourth instalments, ie the instalments that had not been the subject of the first action. The outcome of that dispute depended on whether the consent judgment prevented the liquidator from disputing that the agreement was the one that the plaintiff had alleged. The Court held that an estoppel arose from the judgment that had been consented to because it could only have been given if the agreement that the plaintiff alleged had existed. There could not, however, have been a res judicata, because the cause of action that had been sued on, and concerning which judgment had been obtained, was only for the second instalment.

75As well as situations where it is appropriate to find that there is an Anshun estoppel, or an issue estoppel arising from consent orders, there may well be situations where negotiations between the parties for the settlement of litigation are found to result in an agreement not to sue concerning certain subject matters. There can be such an agreement not to sue even though it is not found that there is an agreement that there be any implicit court order that certain proceedings are otherwise dismissed. If there is such a contractual agreement not to sue, it might be enforceable by injunction, but not through res judicata.

76Whether the Consent Orders should be treated as implicitly containing an order that dismisses all claims made in the 2007 Proceedings, save to the extent that the Consent Orders provide otherwise, is itself a matter of construction of the Consent Orders. Construction of consent orders is a task concerning which, at least sometimes, surrounding circumstances may be called in aid: Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567; Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 at [28]-[29], [36]-[37] per Hodgson JA; [129]-[140] per Santow JA, [141] per Tobias JA; Nokia Corporation v Liu [2009] FCAFC 138; (2009) 179 FCR 422 at [29]-[30] per Finn, Sundberg and Edmonds JJ; Masterton Homes Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382 at [109] per Campbell JA (Allsop P and Basten JA agreeing); Lee v NSW Crime Commission [2012] NSWCA 262 at [14]-[15] per Bathurst CJ (Macfarlan JA and Barrett JA agreeing). Mr Gleeson SC fairly stated that he did not know whether there were any surrounding circumstances that could be used as an aid to construction of the Consent Orders - but that is because the question of using surrounding circumstances to construe the Consent Orders has not been litigated. The proper construction of the Consent Orders will need to be litigated for the purpose of deciding the proper construction of order 1(c). It is premature to assume the answer to that enquiry at this stage of the litigation, in the way that is implicit in striking out paragraphs of the Amended Notice of Motion in the 2007 Proceedings, and of the 2011 Statement of Claim, on the basis that they are precluded by a res judicata.

77In Chamberlain at 508 their Honours also referred to the statement of Brennan J in Anshun at 610, that the words "cause of action" are:

"Sometimes used to mean the facts which support a right to judgment ... sometimes to mean a right which has been infringed ... and sometimes to mean the substance of an action as distinct from its form ..."

There are significant difficulties in ascertaining what was the "cause of action" that was being asserted in the 2007 Proceedings so far as dividends paid by Zipor are concerned. The only facts that were asserted in the body of the Amended Statement of Claim to support a right to judgment concerning dividends paid by Zipor were facts relating to the dividends alleged to have been declared in the year ended 30 June 2004 and on 10 May 2006. However, prayer for relief number 8 in the 2007 Amended Statement of Claim ([29] above) is cast in words that are capable of applying to each of the Zipor Additional Dividends, that are now known to have been paid. There is room for argument about whether the "cause of action" asserted concerning Zipor dividends, was a single cause of action constituted by the alleged breach of fiduciary duty in transferring Hedy's "A" share to Helen, with the consequent declaration of dividends as analogous to particulars of damage of that one wrong, or whether there was a separate cause of action concerning each dividend. However, whatever the cause of action might be, one cannot say at this stage of the proceedings that there is a judgment in which it has merged. The only possible candidates seem to be Clause 1(c) of the Consent Orders (whose scope has not yet been determined, but fairly clearly requires payments to Leo's estate rather than the payments to Tami personally, or to Hedy's estate in the way claimed by prayers for relief 3 and 8 in the 2007 Amended Statement of Claim), or perhaps an implicit order for the proceedings to be otherwise dismissed (a decision about the existence of which also requires a construction exercise that has not yet been carried out).

78In the written submissions to this Court relating to the 2007 Proceedings, there was a submission, unsupported by any further reasoning, that "the Respondents contend that it is an abuse of process for the Applicant to seek to litigate the same breach of fiduciary duty claim now in this proceeding and in the 2011 proceeding." As previously mentioned, any contention that the proceedings that Tami now seeks to bring are an abuse of process could be decided only after an examination of the facts surrounding the entering of the Consent Orders. At least one matter that would bear upon whether it was unreasonable for Tami not to have brought the claim concerning the Zipor Additional Dividends in the 2007 Proceedings, would be the time at which and circumstances in which she came to know that there had been any Zipor Additional Dividends paid. The surrounding circumstances have not been investigated. At the hearing of the present applications, Mr Jackman rightly did not seek to support the contention that this Court could now decide that there had been an abuse of process.

79I should also mention that Mr Jackman makes no submission that it was inappropriate for any of the relief that is now sought in the Amended Notice of Motion in the 2007 Proceedings to be sought by notice of motion in those proceedings, rather than by being brought in separate proceedings.

80For the foregoing reasons, the paragraphs in question should not have been struck out on the basis that there was a res judicata. As their striking out will affect the future course of the action, it is appropriate to grant leave to appeal, and allow the appeal.

81Mr Henley had been named as a fourth respondent in the summons seeking leave to appeal in the 2007 proceedings. However, he took no active part in the appeal. No costs order should be made against him.

Orders

82I propose the following orders:

In matter 2007/287773

(1) Grant leave to appeal.

(2) Direct the Applicant to file a Notice of Appeal in the form of the draft contained in the White Book within 14 days.

(3) Appeal allowed.

(4) First, Second and Third Respondents to pay the costs of the Applicant of the application for leave to appeal and the appeal.

(5) Respondents to have a certificate under the Suitors' Fund Act 1951 if qualified.

(7) Reserve further consideration of the order that should be made pursuant to the preceding direction.

In matter 2011/11682

(1) Grant leave to appeal.

(2) Direct the Applicant to file a Notice of Appeal in the form of the draft contained in the White Book within 14 days.

(3) Appeal allowed.

(4) Respondents to pay the costs of the Applicant of the application for leave to appeal and the appeal.

(5) Respondents to have a certificate under the Suitors' Fund Act 1951 if qualified.

(6) Direct the parties to consult on the orders required to strike out those parts of the Statement of Claim that the Applicants have accepted in argument should be struck out,

(7) Reserve further consideration of the order that should be made pursuant to the preceding direction.

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Schedule of Differences Between Paras Struck Out in 2011 Statement of Claim and Paras 7-47 of 2007 Amended Statement of Claim

1. Cross-references to other paragraphs in the Statement of Claim are different, to account for any paragraph in the 2011 Statement of Claim not bearing the identical number to the corresponding paragraph in the 2007 Amended Statement of Claim.

2. Consolidated is referred to by a different name in the two documents.

3. In the paragraph that alleged that the transfer of Hedy's "A" share was at an undervalue, the particulars in each Statement of Claim had alleged that a control premium should have been payable, and contended that the value of the control premium was equal to the value of the dividends and franking credits subsequently paid by Zipor less the part of those dividends and franking credits paid to Leo's estate and to Hedy or to Hedy's estate. The 2007 document quantified that amount as $9,789,710, while the 2011 document quantified it as $11,039,710. The difference arises from the 2011 document having taken into account the Zipor Additional Dividends, and franking credits attributable to them, while the 2007 document had not taken those dividends and franking credits into account.

4. The particulars of a paragraph that alleged that Consolidated was a company controlled by Ami are amended in the 2011 Statement of Claim to take account of a change that occurred on 3 February 2009 in the shareholders of Consolidated, arising from a change in the identity of the trustee of the Weinstock Family Trust from one company alleged to be under Ami's control to another company also alleged to be under Ami's control.

5. The paragraph that alleged what were the effects of transferring one "A" class share to Helen contained an allegation, in the 2007 Amended Statement of Claim that Consolidated was a company which Ami controlled. That allegation does not appear in the corresponding particular in the 2011 Statement of Claim, but the allegation had been made at an earlier point in the 2011 Statement of Claim.

6. The paragraph in the 2011 Statement of Claim that identifies the dividends that Zipor declared adds to the list the Zipor Additional Dividends, and gives particulars of those additional dividends. In the 2011 Amended Statement of Claim, the particulars of the quantum of damage alleged to have been suffered by Hedy's estate is $11,039,710, rather than the lower amount that had appeared in the corresponding paragraph in the 2007 document.

7. Paragraph 46 of the 2007 Amended Statement of Claim gave particulars of the amount that it was contended Ami should give restitution to Tami, while the corresponding paragraph in the 2011 Statement of Claim has no particulars at all.

83MEAGHER JA: I agree with Campbell JA.

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Decision last updated: 13 September 2012

Court of Appeal Supreme Court New South Wales

Judgment

Nature of the Proceedings

Issues in the 2007 Proceedings

The Consent Orders

Some Facts Giving Rise to the 2011 Litigation

Tami's Amended Notice of Motion in the 2007 Proceedings

The 2011 Statement of Claim

Allegations in 2011 Statement of Claim

The Judgment Appealed From

Orders

Schedule of Differences Between Paras Struck Out in 2011 Statement of Claim and Paras 7-47 of 2007 Amended Statement of Claim

Court of Appeal
Supreme Court
New South Wales