Najjar v Najjar

By a Notice of Motion filed on 12 February 2015, the defendants seek an order under Uniform Civil Procedure Rules 2005 (NSW) r 14.28 that certain paragraphs of the plaintiffs’ Amended Statement of Claim be struck out. The defendants, for whom Mr M V Sahade of Counsel appeared, contend that certain of the plaintiffs’ claims are not maintainable, either because they are precluded by the principles of res judicata or issue estoppel, or are an abuse of process. The plaintiffs, for whom Mr D C Eardley of Counsel appeared, contend that the principles of res judicata and issue estoppel do not operate in the circumstances to preclude the bringing of the claims, and that in doing so the defendants are not engaged in any abuse of process.

The proceedings were commenced on 5 August 2013 by the filing of a Statement of Claim. The plaintiffs are Robert Najjar and Salam Najjar (the parents of the late Lorie Najjar, who died in 2005), and Grenstar Pty Ltd (“Grenstar”), a company controlled by Robert Najjar. The defendants are Najwa Najjar, who was the wife of the late Lorie Najjar, and Lorie Najjar & Sons Pty Limited (“Lorie Najjar & Sons”), a company that was formerly controlled by the late Lorie Najjar but is now under the control of Najwa Najjar.

The Amended Statement of Claim was filed on 11 April 2014. Particulars of that pleading were sought by the defendants in June 2014, and particulars were provided by the plaintiffs in October 2014. No defences have yet been filed.

The plaintiffs plead various claims against the defendants, including the following:

By their Notice of Motion, the defendants seek the striking out of each of those claims. Broadly, it is put that each of those claims was the subject of earlier proceedings in this Court that were heard and determined by Black J, and that the pleading of the claims in the present proceedings constitutes an impermissible attempt to re-litigate issues that were determined adversely to the plaintiffs in those earlier proceedings.

The proceedings before Black J concerned the winding up of Lorie Najjar & Sons, which had been placed into voluntary liquidation in 2008. The proceedings were commenced by the liquidator, who claimed that certain payments made by the company to Najwa Najjar in 2007 were recoverable under s 588FDA of the Corporations Act 2001 (Cth), and were made in breach of her duties as a director of the company. Najwa Najjar filed an Interlocutory Process in the proceedings by which she sought orders under s 482 of the Corporations Act for the termination or stay of the winding up.

That application, which was initially pressed as a stay pending the determination of the costs properly payable to the liquidator, was heard by Black J on various dates in March, April and May 2013. His Honour delivered a judgment on 18 June 2013 (see In the Matter of Lorie Najjar & Sons Pty Ltd (in liq) [2013] NSWSC 798) in which he concluded that the winding up be stayed (see at [134]). The present plaintiffs were not, at least at that stage, parties to the proceedings before Black J. However, they had been granted leave to be heard in the proceedings pursuant to r 2.13(1) of the Supreme Court (Corporations) Rules 1999 (NSW).

In his judgment delivered on 18 June 2013, Black J stated (at [3]):

On the question of solvency, which his Honour regarded as the key question to be determined (see at [29]), it was the position of the liquidator that Lorie Najjar & Sons was insolvent from at least August 2007, and remained so thereafter. The liquidator’s analysis of insolvency rested in large part on treating $1,225,000 (referable to the debt previously owing to ING Bank) as owing to Mr and Mrs Najjar Senior and $1,309,804 (referable to the debt previously owing to AMP Bank) as owing to Grenstar (see at [27]).

Black J proceeded to make various findings and reach various conclusions including the following:

At [134] his Honour concluded:

As noted earlier, the present plaintiffs had been granted leave to be heard under r 2.13(1) of the Supreme Court (Corporations) Rules. It appears that they were represented by Counsel at the hearing, and that Counsel cross-examined witnesses and made submissions. On 30 April 2013, during the course of the hearing, a direction was made that any application by them to become parties should be made by 8 May 2013, and that any further evidence to be led by them should be served by that date. I was informed that no such application was made, or further evidence served. However, it appears from Black J’s judgment that an affidavit sworn by Mr Najjar Senior was read at the hearing, and he was cross-examined. It is also apparent that the present plaintiffs were involved as funders of the liquidator in the earlier proceedings.

It should be noted that Black J seems to have considered that it would be open to the present plaintiffs to pursue their various claims against Lorie Najjar & Sons at a later stage. That appears from the judgment at [2], as well as from [123]-[124] where his Honour said:

Mr Sahade submitted that what his Honour said at [123] should be read as intending to refer only to pursuit of unliquidated claims. I do not think that the paragraph should be read in that way. His Honour included a specific reference to a claim based on the assignment of the ING Bank debt, and further employed the expression “or any other basis”. Moreover, after expressing his view that the evidence did not support a conclusion that Lorie Najjar & Sons was insolvent, his Honour said at [135]:

The present proceedings were commenced within two months of the delivery of Black J’s judgment. On 3 October 2013, the plaintiffs filed a Notice of Motion seeking, inter alia, leave to proceed against Lorie Najjar & Sons, and a stay of the liquidation of the company pending the hearing of the plaintiffs’ claims. The proceedings, along with the liquidator’s proceedings, came before Black J for directions on 29 October 2013 and 4 December 2013.

By that time, the present defendants were seeking orders in the liquidator’s proceedings that the winding up be terminated. The hearing of that application, and an application by the liquidator for certain costs to be paid by the present plaintiffs as funders of the proceedings, took place on 19 December 2013 before Black J.

On that occasion, the liquidator filed an Amended Interlocutory Process to seek an order that the present plaintiffs be joined as defendants to the liquidator’s proceedings under either Supreme Court (Corporations) Rulesr 2.13(3) or Uniform Civil Procedure Rules r 6.24. Black J, in an ex tempore judgment delivered on that day, concluded that such a joinder should occur. His Honour noted that the present plaintiffs were opposing the costs orders sought against them. He also noted that they were seeking a stay of the winding up rather than a termination of it. His Honour said (at pages 6-7):

During the course of the hearing on 19 December 2013, the present plaintiffs made a submission that the most appropriate course would be for the liquidation to be stayed pending the determination of the proceedings they had recently commenced. The present plaintiffs were given the opportunity to file further evidence in opposition to the proposed termination of the winding up (which, by that stage, was not opposed by the liquidator). It appears that such an affidavit was filed on about 31 January 2014. No party sought a further oral hearing in respect of that evidence.

Black J delivered a further judgment on 12 February 2014 (see In the matter of Lorie Najjar & Sons Pty Limited (in liq) (No 9) [2014] NSWSC 56). His Honour:

Mr Sahade, in his written submissions, put that, having regard to what occurred in the liquidator’s proceedings before Black J, and particularly his Honour’s findings on issues going to the question of solvency, it was an abuse of process for the plaintiffs to seek to re-litigate the issues concerning:

(These issues will henceforth be together referred to as “the impugned issues”). No complaint was made in respect of the claim for contribution in respect of the ING Bank loan.

Mr Sahade referred to the judgment of Gageler J in Plaintiff S3-2013 v Minister for Immigration and Citizenship [2013] HCA 22 at [10]-[12]. At [11], Gageler J referred to the joint judgment in Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 at 393 where it was stated:

At [12] in Plaintiff S3-2013 v Minister for Immigration and Citizenship (supra), Gageler J referred to the statement made by Lord Bingham of Cornhill in Johnson v Gore Wood & Co (No 1) [2002] 2 AC 1 at 31 that:

The above statement of Lord Bingham had earlier been cited with approval by French CJ in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [34].

In the course of his oral submissions, Mr Sahade referred also to the principles of res judicata and issue estoppel. He submitted that these principles were applicable and operated against the plaintiffs in this case in circumstances where the plaintiffs were made parties to the liquidator’s proceedings in December 2013. As I understand the submission, it was put that the plaintiffs are bound by the terms of Black J’s judgment that the winding up be terminated and by his Honour’s adjudication that Lorie Najjar & Sons was not insolvent. It was further put that the plaintiffs are bound by the critical or essential findings of fact made by Black J that underpin his conclusion as to solvency.

In my view, the plaintiffs are not prevented, either by the principle of res judicata, or by reason of any issue estoppel, from advancing any of the claims made in the Amended Statement of Claim. Neither basis provides a good ground for striking out the impugned claims.

The principle of res judicata operates to prevent a right or cause of action, that has merged into a judgment in a proceeding, from being maintained in a subsequent proceeding (see Blair v Curran (1939) 62 CLR 464 at 532 per Dixon J; Jackson v Goldsmith (1950) 81 CLR 446 at 467 per Fullagar J; Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; (1981) 147 CLR 589 at 597). The causes of action advanced by the plaintiffs in these proceedings were not causes of action that were pursued and taken to judgment in the earlier proceedings. Those proceedings, insofar as they were dealt with by Black J in 2013, concerned Najwa Najjar’s application for orders under s 482 of the Corporations Act, not any rights or causes of action asserted by the plaintiffs. The plaintiffs, who did not become parties to the earlier proceedings until after Black J had delivered his judgment in June 2013 and ordered that the winding up be stayed, at no stage sought to have any of its causes of action litigated in those proceedings.

Issue estoppel was described by Dixon J in Blair v Curran (supra) in the following terms (at 531-532):

(see also Starke J at 510).

As Dixon J’s description makes clear, an issue estoppel only operates in later proceedings between the same parties or their privies. Here, the plaintiffs became parties to the liquidator’s proceedings to which the defendants were also parties. However, this did not occur until after Black J had delivered his judgment on Najwa Najjar’s application for a stay of the winding up. The issue estoppels alleged in this case are said to arise from the findings made by Black J in that judgment.

I was not referred to any authority, and I am not aware of any authority, to the effect that an issue estoppel could bind a person who was not a party to proceedings at the time the relevant judicial determination was made. In my view the plaintiffs, who were not parties until 19 December 2013 (albeit that they had earlier been given leave to be heard under Supreme Court (Corporations) Rules r 2.13(1)), cannot be bound as a party by any issue estoppel arising from the findings made by Black J in his judgment of 18 June 2013.

It was not suggested by Mr Sahade that the plaintiffs, by virtue of their role in the proceedings, including as funders of the liquidator, are relevantly privies of the liquidator. In any case, I do not see any basis to conclude that the plaintiffs are privies of the liquidator (see Ramsay v Pigram (1968) 118 CLR 271 at 279 per Barwick CJ; see also the discussion by Gummow J of privity in interest in Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 36 FCR 406 at 413-417, affirmed in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510).

In the light of those conclusions it is not necessary to consider the extent to which the findings made by Black J in his judgment of 18 June 2013 might otherwise have given rise to issue estoppels binding upon the plaintiffs. In that regard I note, however, that his Honour’s decision to stay the winding up was fundamentally based upon his conclusion that Lorie Najjar & Sons was not presently insolvent, and that such conclusion was in turn squarely based upon his various findings to the effect that the two main debts alleged by the liquidator were not made out on the evidence (see, for example, the findings at [59], [60], [62], [67], [85] and [103]).

I turn now to consider the defendants’ contention that the plaintiffs, by seeking to litigate the impugned issues, are engaging in an abuse of process. The conduct is said to amount to an abuse primarily because it involves the re-litigation of matters that have already been disposed of by Black J. It was also suggested that the conduct may amount to an abuse because it involves the raising of matters that should have been raised by the plaintiffs, if at all, in the proceedings before Black J.

There is no doubt that an attempt by a party to re-litigate an issue resolved adversely to that party in earlier proceedings can amount to an abuse of process even in the absence of res judicata or an estoppel (see Reichel v Magrath (1889) 14 App Cas 665; Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 at 393; Rogers v The Queen (1994) 181 CLR 251 at 286-287; Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198 at [15]-[33] per Handley JA; see also the recent discussion by Brereton J in Re HIH Insurance Ltd (in liq); De Bertoli Wines (Superannuation) Pty Ltd v McGrath [2014] NSWSC 774 at [19]-[20]).

In one sense, the impugned issues were resolved in the liquidator’s proceedings adversely to the current plaintiffs. Moreover, even though the current plaintiffs did not become parties to those proceedings until after those issues had been dealt with in Black J’s judgment of 18 June 2013, they had the opportunity and the practical ability to place relevant evidence before the Court, and participate in the hearing to at least some extent. They also had an involvement as funders of the liquidator, and in that role had, as Black J found, a significant degree of control over the conduct of the proceedings through the choice of legal representatives.

Nevertheless, the liquidator’s proceedings as constituted was never a vehicle for the plaintiffs to seek to vindicate their claimed rights against Lorie Najjar & Sons. The company remained in liquidation and the plaintiffs were pursuing their claims through the lodgement of proofs of debt. No attempt was made by the plaintiffs to obtain leave to proceed against the company to pursue their claims in those proceedings. It seems to me that, in these circumstances, the plaintiffs should not be regarded as being in a position akin to parties who, having pursued their rights (or sought to defend their position) in litigation, and having lost, seek to re-litigate the same matter in subsequent proceedings.

Viewed that way, the pursuit of these proceedings by the plaintiffs does not seem to me to involve any significant unfairness to or oppression of the defendants. Further, having regard to the nature of the liquidator’s proceedings as constituted, I do not think that any findings in these proceedings favourable to the plaintiffs would be fairly regarded as so inconsistent with the findings made by Black J that the integrity of the system of justice would be called into question.

Although not determinative, it is noteworthy that Black J himself expressly contemplated that the plaintiffs might bring other proceedings to pursue claims against Lorie Najjar & Sons. His Honour evidently regarded such a course as one properly open to the plaintiffs, notwithstanding his findings on the question of solvency. I note also that after these proceedings were commenced, and were before Black J in late 2013 in conjunction with the liquidator’s proceedings, no suggestion seems to have then been made that they amounted to an abuse of process. As far as I am aware, that suggestion was not made until the present motion was brought in February this year.

It is also my view, based upon the nature of the liquidator’s proceedings as constituted, that this is not a case where it can be said that the plaintiffs, if they were going to raise the impugned claims at all, ought to have done so in the liquidator’s proceedings.

For the above reasons, I do not think that the pursuit of the impugned claims by the plaintiffs in these proceedings amounts to an abuse of the process of the Court.

It follows from the above that the defendants’ strike out motion fails. The Court will order that the defendants’ Notice of Motion filed on 12 February 2015 be dismissed with costs.