In Anfuso’s Case [2007] VCAT 1690, Member Butcher of VCAT’s Legal Practice List gave summary judgment for a solicitor by reference to the principles of accord and satisfaction. The solicitor had sued for her fees in the Magistrates’ Court. She got default judgment against her former client, and got an order that his employer pay some of his wages directly to her in satisfaction of the judgment debt. He applied to set it aside. They settled the whole thing. He promised to pay the balance owing and in return, she agreed to the setting aside of the judgment and of the attachment of earnings order. Then he decided to sue the former solicitor in VCAT, and it was this suit which was thrown summarily out of court. Member Butcher described the claim:
‘Mr Anfuso engaged [the solicitor] to act on his behalf in relation to the purchase of a property. The legal services were quoted at a certain price with a proviso that additional work would be charged in the event of any difficulties. Some difficulties did arise and additional charges were made. It is not a matter that I need dwell upon, the propriety of the charges, however this application made by Mr Anfuso is seeking re-payment of moneys paid by him in relation to that work and subsequent legal costs incurred when [the solicitor] sued him for those fees but also his own legal expenses. The particulars of the claim also make allowance for an amount of professional fees which were originally quoted.’
Whatever cause of action Mr Anfuso might have had seems to have merged, in Member Butcher’s view, in the settlement agreement.
I once tried to sort out the differences between res judicata, issue estoppel, Anshun estoppel, and accord and satisfaction by way of introduction to the rule against collateral attack in ‘Compromise of litigation and lawyers’ liability: Forensic immunity, litigation estoppels, the rule against collateral attack, confidentiality and the modified duty of care’ (2002) 10 Torts Law Journal 167. This is what I said, though the formatting is a bit impoverished by the transition to the blog:
3. Estoppels and other brakes on re-litigation
This article turns now to investigate the law’s limits on re-litigation. All solicitors’ negligence cases arising out of litigation in which the outcome of the litigation is under scrutiny involve an element of re-litigation. None of res judicata, issue estoppel and Anshun estoppel (or ‘could have and should have estoppel’) will usually have any application in such proceedings. The rule against collateral attack will often potentially apply, however. An examination
of the whole spectrum of brakes on litigation is desirable for two reasons. First, it puts in context the rule against collateral attack of the judgment of a court of competent jurisdiction, discussed below in its application to claims against lawyers arising out of settlements. Secondly, the application to settlements, and to consent orders, of the rules against re-litigation is little written about and much misunderstood. This part of the article demonstrates that res judicata, issue estoppel, Anshun estoppel, and the rule against collateral attack on a final judgment all apply equally to consent orders and judgments by consent as to judgments and orders after a contested hearing, so long as the court in the second proceeding can determine the elements of the compromised cause of action merged in — or the issue necessarily determined by — the judgment by consent.3.1 The public policy in favour of brakes on re-litigation
Two ancient policy ideals are behind each of res judicata, issue estoppel, and ‘could have and should have estoppel’, discussed below:(a) interest reipublicae ut sit finis litium (public policy demands that there be an end to litigation — a short game’s a good game); and
(b) nemo debet bis vexari pro eadem causa (no one should be vexed by being sued twice for the same thing).
In Rogers v R, the majority in the High Court observed of these maxims that:
The first expresses the need, based on public policy, for judicial determinations to be final, binding and conclusive. The second looks to the position of the individual and reflects the injustice that would occur if he or she were required to litigate afresh matters which have already been determined by the courts. It is correct to say that res judicata or cause of action estoppel derives from the principles embodied in those maxims, which principles are fundamental to any civilised and just judicial system. There is, however, another related principle, likewise fundamental, which is embodied in the Latin maxim res judicata pro veritate accipitur. That maxim gives expression to a rule of Roman law which has since been recognised as part of our common law. It expressed the need for decisions of the court, unless set aside or quashed, to be accepted as incontrovertibly correct.28
The public policies behind the rule against collateral attack are similar, but in solicitors’ negligence cases typically do not involve any consideration of the private interests of the defendant in not being vexed twice by the same claim. A key feature which typically distinguishes the rule against collateral attack from the three litigation ‘estoppels’ is the lack of identity between the parties which is a feature of the rule against collateral attack.
3.2 Res judicata; accord and satisfaction
3.2.1 Res judicata
What is generally just called ‘res judicata’ is also known as ‘cause of action estoppel’ and ‘estoppel per rem judicatam’. Res judicata means ‘the matterhaving been decided’, while estoppel ‘per rem judicatam’ means estoppel by reason of the matter having been decided. It has been said that res judicata is not an estoppel at all, but a rule of public policy.29
The rule of res judicata is the civil equivalent of the criminal principles autrefois acquit and autrefois convict, although they are more correctly different species of the same genus. Just as no person may be charged again with the same crime for which he or she has been tried (no matter how cogent the new evidence), no defendant may be sued on a cause of action which has been adjudged. The cause of action is extinguished by the judgment. The rights and obligations of the parties under the cause of action are said to ‘merge’ with the rights under the judgment.30 The doctrine of merger applies not only to the cause of action on which judgment is given but also to alternative remedies, regardless of whether or not the two remedies are pursued in the same action. Thus, clients suing their lawyers in tort and contract are put to their election between the two remedies before judgment, and judgment is entered on only the cause of action elected for, but the other cause of action arising from the same facts merges in the judgment.31
3.2.2 Res judicata and consent orders
When parties settle their dispute, they might agree that the plaintiff withdraw, or consent to the dismissal of the dispute, or consent to judgment for one party or the other in terms agreed by consent. Prima facie, withdrawal or discontinuance does not create an estoppel per rem judicatam, since there is no adjudication by consent or otherwise. However, there are instances where the courts have recognised that the parties having consented to the withdrawal or discontinuance intended to put an end to the litigation such that they would be barred from instituting new proceedings.32
Although one of the criteria to be satisfied in establishing an estoppel per rem judicatam is that the judicial decision was final and made on the merits,33 that does not mean that a judgment by consent or consent orders do not found such an estoppel, because any ‘decision which determines an issue otherwise than on purely procedural grounds is a decision on the merits’.34 In fact, the courts will strive to discern which issues were finally decided by a consent order by an examination of the pleadings and evidence in the earlier proceedings.35 Indeed, a consent order is more efficacious in this regard than a default judgment, since the latter may ‘speak for nothing but the fact that a defendant, for unascertained reasons, negligence, ignorance or indifference, has suffered the judgment to go against him’.36
3.2.3 Accord and satisfaction
There is a rule associated with settlements correlative to res judicata. It is known as the defence of accord and satisfaction. The ‘accord’ is the settlement contract. The requirement of ‘satisfaction’ is not that the promises constituting the settlement have been fulfilled. It is that the previous cause of action has been satisfied by the creation of a new set of rights and obligations. In this way, the term ‘satisfaction’ is to settlements a bit like merger is to judgments.37 The High Court recently adopted this explanation of accord and satisfaction by the Victorian Court of Appeal:Where there is an accord and satisfaction, the agreement for compromise may be enforced, and indeed only that agreement may be enforced, because ex hypothesi the previous cause of action has gone; it has been ‘satisfied’ by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise of other benefit.38
Just as res judicata applies only where the plaintiff and defendant were the same in the matter adjudged as in the new proceeding, the defence of accord and satisfaction is available only to the parties to the judgment, and to their ‘privies’.39
3.3 Issue estoppel
The next step in the line of brakes against re-litigation is issue estoppel. Exactly the same issue may be directly relevant to more than one cause of action against the same party. Issue estoppel operates to extend res judicata across causes of action between the same parties to prevent a defendant being vexed twice over substantially the same dispute by the plaintiffs recasting their allegations in different legal language. The current author of the leading Anglo-Australian text, The Doctrine of Res Judicata, is Justice K R Handley.He deals with res judicata and issue estoppel as two sides of the same coin. More commonly, issue estoppel is seen as something different from res judicata.40
The classical exposition of issue estoppel is this one, by Dixon J:
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 estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. . . . Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived.41
The same principles as apply res judicata to consent orders and judgments by consent as set out above under the previous heading apply equally to issue estoppel.
3.4 ‘Could have and should have estoppel’
Two cases dominate discussion of this kind of estoppel in Australia where it is known as ‘Anshun estoppel’, after the case of Port of Melbourne Authority v Anshun Pty Ltd.42 I will call it ‘could have and should have estoppel’ so as to avoid confusion between what the English call either ‘the rule in Henderson v Henderson’ or ‘Reichel v McGrath estoppel’, and what we call Anshun estoppel, particularly since the facts of none of those cases really justify the breadth of the rules with which their names have come to be associated.433.4.1 Henderson v Henderson
The first case is Henderson v Henderson, where it all started when Wigram VC said, back in 1843, that:The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.44
3.4.2 Anshun’s case
The second is Port of Melbourne Authority v Anshun Pty Ltd45 (‘Anshun’s case’), which contains the High Court’s learning on the subject. There, a man was injured by a crane at the docks. He sued his employer and the occupier of the docks in one proceeding. Each claimed contribution from the other. Judgment for the full amount of the worker ’s damages was entered against both, and contribution went 90:10 in favour of the employer. In other words, though the employer was liable as against the worker by the principles of joint and several liability under a judgment to pay all of the worker ’s damages, it was entitled to a judgment against the occupier for 90% of the damages, and 90% of the costs of the proceedings. After judgment, someone at the offices of the occupier must have woken up and noticed that the employer had given the occupier a full indemnity against damage associated with the use of the occupier ’s cranes unless the loss was caused solely by the occupier. Safe in the knowledge that it was not solely responsible for the injury, since it was ‘only’ 90% at fault, the occupier issued new proceedings against the employer suing on the indemnity. The employer said, in substance, ‘You could have raised that point in the earlier proceedings, you should have done so, and now it’s too late; you’re estopped.’The Victorian contribution legislation provided that a person who had given an indemnity against the liability against which contribution is sought ‘shall not be entitled to recover contribution’ against the beneficiary of the indemnity, a statutory proviso no doubt informed by the common law rule against circuity of action.46
It sounds like an issue estoppel case.47 Given the proviso, one might think that the judgment, which allowed the beneficiary of the indemnity to recover contribution from the indemnitor in respect of liability covered by the indemnity, disposed of the issue of the existence of an indemnity. Neither the majority48 nor Brennan J decided the case by reference to issue estoppel principles, however. To understand why the majority did not consider it a case of issue estoppel, it is necessary to zero in on their finding that although the indemnity could have been a defence to the employer ’s claim for contribution in the first proceeding, the absence of an indemnity was not a necessary element in the cause of action for contribution under the statute, and was thus not determined not to exist,49 even though the original decision as to the employer ’s and the occupier ’s obligations as against each other would contradict the decision in the second proceedings if the occupier were successful.50 But the majority was prepared to stretch the principles of issue estoppel just enough to say that the contradiction between the original judgment and any judgment for the occupier in the second proceedings was enough to evidence an abuse of process:
The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation of a cause of action in a second proceeding. By ‘conflicting’ judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction. It is for this reason that we regard the judgment that the [occupier] seeks to obtain as one which would conflict with the existing judgment, though the new judgment would be based on a different cause of action, a contractual indemnity.51 Brennan J seems really to have relied on res judicata, asserting that the occupier had two alternative causes of action against the employer: one statutory, and one contractual, and the contractual cause of action merged in the judgment on the statutory cause of action and barred the second claim,52 just as a solicitor sued unsuccessfully in negligence may not be sued a second time simply because the former client did not put forward the contractual cause of action the first time.53
For whatever reason, the majority recast the test in Henderson v Henderson as follows, and it has stuck:
there will be no estoppel unless it appears that the matter relied upon as a defence
in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one
proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.543.4.3 Johnson v Gore Wood & Co
Now there is a third significant decision, of the House of Lords in a solicitors’ negligence case, Johnson v Gore Wood & Co (a firm).55 A company controlled by an individual sued its former solicitors for negligence. In the sixth week of the trial, the case settled for one and a half million pounds or so, plus a third of a million pounds in costs ‘in full and final settlement’ of the company’s claim against the solicitors. Well before then, however, there had been talk between the competing camps of a personal claim by the individual who controlled the company for breach of a separate duty of care owed by the solicitors to him in the same retainer as that in which the solicitors were said to breach their duties to the company. The individual said he suffered losses which were distinct from the company’s losses. The parties expressly provided for such a claim in the terms of settlement of the company’s claim, agreeing that any such claim should be capped at a quarter of a million pounds. The personal claim was commenced in due course, and five years later judgment was delivered on a preliminary issue of law argued by the solicitors, that the claim was barred by ‘could have and should have estoppel’. They alleged the individual’s claim could have and should have been put forward with the company’s claim.It is not surprising, given the facts, that the solicitors were unsuccessful. The House of Lords made it abundantly clear, however, that but for the express acknowledgment of the likelihood of the second claim, ‘could have and should have estoppel’ might well have applied, despite the fact that the first proceedings were settled and never the subject of a judgment after a contested hearing. Lord Millett expressly recognised that ‘could have and should have estoppel’ applies to cases which were settled as well as to judgments:
the principle [of ‘could have and should have estoppel’] goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V-C, for I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding.56
Lord Bingham acknowledged the academic criticism of the expansive application in later cases of Henderson v Henderson,57 but reaffirmed the place of the principles in the common law of England by saying: ‘Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.’ He also said:
Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be vexed twice in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present thelater proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceedings involves what the court regards as unjust harassment of a party.
It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. . . . Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim.58
Lord Millett gave a salutary warning to those planning serial litigation against the same defendant:
Given that [the individual] was entitled to defer the bringing of his own proceedings until after the company’s claims had been resolved, it would have been unconscionable for him to have stood by without disclosing his intentions and knowingly allowed the firm to settle the company’s action in the belief that it was
dealing finally with all liability arising from its alleged negligence. . . . To bring his own claim in such circumstances would, in my opinion, amount to abuse of the process of the court. But nothing like this took place.59————————————————————————————————————
28 (1994) 181 CLR 251 at 273–4 per Deane and Gaudron JJ, Mason CJ agreeing at 255; 123 ALR 417.
29 Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J; [1950] ALR 559; cf Rogers v R (1994) 181 CLR 251 at 273 per Deane and Gaudron JJ; 123 ALR 417; Blair v Curran (1939) 62 CLR 464 at 531 per Dixon J; D A Christie Pty Ltd v Baker [1996] 2 VR 582 at 603 per Hayne JA; and Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 579 per Gibbs CJ, Mason and Aickin JJ; 36 ALR 3.
30 Blair v Curran (1939) 62 CLR 464 at 532 per Dixon J; Anshun’s case (1981) 147 CLR 579 at 593 per Gibbs CJ, Mason and Aickin JJ, 611 per Brennan J; 36 ALR 3.
31 Anshun’s case (1981) 147 CLR 579 at 611-12 per Brennan J; 36 ALR 3; United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 30; [1940] 4 All ER 20; Mahesan v Malaysia Housing Society [1979] AC 374; [1978] 2 All ER 405. See also G Spencer Bower, A K Turner and K R Handley, The Doctrine of Res Judicata, 3rd ed, Butterworths, London, 1996, (‘Handley’), para [405]. As to the differences between the contractual and tortious causes of action for a solicitor ’s negligence, see S Warne, ‘Legal Professional Liability — Part 2’ (2001) 9 TLJ 29 at 33ff.
32 Handley, above n 31, para [32].
33 Ibid, para [19].
34 Ibid, para [174].
35 Ibid, paras [38]–[39].
36 Ibid, para [45].
37 Of course, there is no satisfaction until there is an accord. A contract which is conditional on some event does not create an accord and satisfaction until the fulfilment of the condition: Osborn v McDermott [1998] 3 VR 1 at 7; McDermott v Black (1940) 63 CLR 161 at 183–5 per Dixon J; Scott v English [1947] VLR 445; Fraser v Elgen Tavern Pty Ltd [1982] VR 398.
38 Osborn v McDermott [1998] 3 VR 1 at 8, referred to in Baxter v Obacelo Pty Ltd (2001) 184 ALR 616 at [62].
39 The meaning of ‘privies’ in this context is discussed at length in Johnson v Gore Wood & Co (a firm) [2001] 1 All ER 481.
40 Hayne JA in D A Christie Pty Ltd v Baker [1996] 2 VR 582 at 603 said ‘they are not to be equated’.
41 Blair v Curran (1939) 62 CLR 464 at 531–2; adopted in Linsley v Petrie [1998] 1 VR 427 at 429 per Hayne JA.
42 (1981) 147 CLR 579; 36 ALR 3.
43 See G Watt, ‘The Danger and Deceit of the Rule in Henderson v Henderson: A New Approach to Successive Civil Actions Arising from the Same Factual Matter ’ (2000) 19 CJQ 287, and, in relation to Anshun’s case, see K R Handley, ‘Anshun Today’ (1997) 71 ALJ 934.
44 (1843) 3 Hare 100 at 115.
45 (1981) 147 CLR 589.
46 Section 24(1)(c) of the Wrongs Act 1958 (Vic) concluded with the proviso ‘so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought’.
47 Brennan and Dawson JJ made the same observation in Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 335; 91 ALR 180.
48 Gibbs CJ, Mason and Aickin JJ delivered a joint judgment and Murphy J delivered an ambiguous judgment of two paragraphs which said the second proceeding was an abuse of process and did not mention any form of estoppel.
49 (1981) 147 CLR 589 at 597–8.
50 Ibid, at 596.
51 Ibid, at 603–4.
52 Ibid, at 611–13. He concluded at 615 that the occupier ’s ‘cause of action in truth merged in the contribution orders and there is no discretionary power to exercise’.
53 See section 3.2.1 (Res judicata) above esp at n 31.
54 (1981) 147 CLR 589 at 602–3.
55 [2001] 1 All ER 481. See G Watt, ‘Henderson is Dead! Long Live Henderson! — The Modern Rule of Abuse of Process’ (2001) 20 CJQ 90.
56 [2001] 1 All ER 481 at 525. Handley, above n 31, adopts the same position at [189].
57 He referred expressly to Watt, above n 43.
58 [2001] 1 All ER 481 at 498–9. Lord Goff expressly agreed at 506. So did Lord Cooke at 509–10, and Lord Hutton at 517.
