Court rejects res judicata and estoppel defenses when new contract breach claim differs from prior default judgment.

[*366] 1977 November 19

(STYLIANIDES, P.D.C. & MICHAELIDES, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Georghios Vakanas,

Plaintiff,

and

Andreas Pantelaki,

Defendant.

(Action No. 5619/75).

Res Judicata - Judgment by default of appearance - Whether it constitutes res judicata - Judgment by default in action for goods sold and delivered - Subsequent action by defendant in former action based on breach of contract - New action based on a completely different cause of action - No res judicata.

Estoppel - Estoppel in pais - Meaning - Judgment by default in action for goods sold and delivered - Arrangement to pay judgment debt by instalments - Whether it forms the basis of estoppel by conduct precluding the defendant from instituting action for damages for breach of contract.

A. Ladas, for the Plaintiff.

E. Odysseos with St. Karides, for the Defendant.

RULING

The ruling of the Court was delivered by:-

STYLIANIDES, P.D.C.:- The plaintiff by this action [*367] claims damages for breach, of contract dated 26.2.1974. The defendant in para.1 of the statement of defence raised a point of law which, if decided in favour of the defendant, disposes of the whole action. The defendant alleged that the plaintiff is precluded from raising this action as this was res judicata in Action No. 5056/74 and further and in the alternative the plaintiff is estopped by conduct from raising and pursuing this action.

On the application of the defendant and with the consent of the plaintiff, these preliminary points of law were taken by the Court under Order 27 of the Civil Procedure Rules.

The file of Action No. 5056/74 was produced by consent as Exhibit 1. By contract dated 26.2.1974, Exhibit 1 in Action No. 5056/74, the present plaintiff was constituted sole agent for the dairy products of the defendant in this action for Limassol town and district. The defendant in the present action was providing his dairy products to the present plaintiff for disposition in that district. The due performance of the obligations of the plaintiff was guaranteed by Anna Vakana.

On 28.9.1974 the present defendant instituted Action No. 5056/74 against Georghios Vakanas and Anna Vakana claiming thereby £2,620.245 mils by virtue of account stated and/or balance of price of goods sold and delivered. The copy of the writ of summons was duly served on the defendants who failed to enter an appearance. On 22.10.1974 judgment was obtained by default of appearance. The judgment-creditor [*368] caused the issue of a writ of movables which was with some delay returned unexecuted.

On 14.2.1975 the judgment-debtors took out a summons whereby they prayed for the setting aside of the judgment obtained against them by default of appearance. This application was supported by affidavit sworn by Georghics Vakanas on 10.2.1975. In para. 3 of the said affidavit there is an attempt to justify the default of appearance and para.5 reads: "We have already given instructions to our advocate for our defence and the statement of defence and the counterclaim are ready". No merits of defence are shown in the affidavit and the cause of the counterclaim is not disclosed in the said affidavit.

The judgment-creditor opposed the application and in support of his opposition he filed an affidavit dated 25.2.1975. He deposed therein that the affidavit in support of the application did not state facts showing a substantial ground of defence and that it was not a proper case in which the Court might lawfully set aside or vary the judgment obtained in default. On 19.3.1975 a supplementary affidavit was filed by Georghios Vakanas in which he stated that the amount of £2,620.245 mils for which judgment was issued was not correct. In the last paragraph it is stated that if the Court granted the application a counterclaim would be raised for breach of contract.

The application to set aside the default judgment was on 12.4.1975 withdrawn by the applicant's advocate and dismissed by the Court. [*369]

On 15.10.1975 the judgment-creditor took out a summons for the sale of the immovable property of the judgment-debtors for the satisfaction of the judgment. That application was adjourned a number of times and finally on 15.11.1976 a consent order for payment by instalments was given.

On 29.11.1975 the present action was filed by Georghios Vakanas against his judgment-creditor in Action No. 5056/74.

(A) RES JUDICATA

It is well settled that if in any Court of competent jurisdiction a decision is reached, a party is estopped from questioning it in a new legal proceeding. But the principle also extends to any point, whether of assumption or admission, which was in substance the ratio of and fundamental to the

decision. In Henderson v. Henderson (1843-1860) All E.R. Rep. p.378, at p. 381, Wigram V. C. said at p. 381:

"I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought [*370] forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special case, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, hut 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".

In Howelett v. Tart (1861) 31 L.J. C.P. 146,Williams, J., said:

"I think it is quite clear upon the authorities to which our attention has been called, and upon principle, that if the defendant attempted to put upon the record a plea which was inconsistent with any traversable allegation in the former application, there would be an estoppel".

Willes, J., in the same case observed, though too widely:

"It is quite right that a defendant should be estopped from setting up in the same action a defence which he might have pleaded but has chosen to let the proper time go by But nobody ever heard of a defendant being precluded from setting up a defence in a second action because he did not avail himself of the opportunity of setting it up in the first action". [*371]

The above pronouncements, however, apply to a judgment in contested proceedings. In N. Brunswick Railway Co. v. British & French Trust Corporation, Ltd. (1938) 4 All E.R. 747, The House of Lords held that:

"Although a contract in identical terms and between the same parties had already been construed by the Court in an earlier action, the defendants were not estopped from raising any argument about the construction of the words relating to the interest payments, because the construction of the interest contract was something different from the adjudged construction of the contract in the earlier action, in which a default judgment was obtained against the defendants. The judgment by default is only an estoppel in respect of the matter directly decided".

Lord Wright said at p. 765:

"A judgment by default, if not set aside by the Court in a proper application under the rules of Court, is binding on the parties (which term may, in this, as in other, cases, include privies), and constitute res judicata in respect of the matter directly decided".

And further down:

"It may be that, where a matter of fact or law has been adjudicated upon by the Court on the same instrument, and in regard to the same facts [*372] as between the same parties, an estoppel arises in regard to that matter, at least in a case where the party estopped has appeared in the proceedings and either contested the issue or contested the particular

decision. This is not res judicata in the sense that the judgment binds the parties, hut it is based on analogous principles".

In Kok Hoong v. Leong Cheong Kweng Mines, Ltd. (1964)

1 All E.R. 300, Viscount Radcliffe, said at p.306:

"Default judgments though capable of giving rise to estoppel, must always be scrutinized with extreme particularity for the purpose of ascertaining the bare essence of what they must necessarily have decided, and, to use the words of Lord Maugham, L.C., they can estop only for what must 'necessarily, and with complete precision’ have been thereby determined" (See also Pople v. Evans (1968) 2 All E.R. 743).

In Davies v. Hedges, Law Rep. 6 Q.B. 687, the plaintiff had a right of action and the defendant a right of set-off. The plaintiff obtained a judgment without the defendant having pleaded the set-off. It was held that it did not prevent the defendant from enforcing his rights by a separate action. Reference is made with approval to this case in Caird v. Moss (1886) 33 Ch. D. 22, where at page 34 Cotton, L.J. said:

"It was indeed open to the defendant in the original action to bring forward his claim in [*373] that action by way of counterclaim; but those claims were distinct causes of action, and though he might have brought them forward in the original action it was right to hold that his not having done so did not bar him from seeking to enforce them by an independent proceeding".

In Public Trustee v. Kenward (1967) 2 All E.R., p. 870, Buckley, J., after referring to Greenhalgh v. Mallard (1947)2 All E.R. 255, and to the pronouncement of Wigram V.C. in Henderson v. Henderson, he said at p.873:

"The fact that, when an action is brought by A against B, B might in the same proceedings have raised a counterclaim against. A relating to some quite different cause of action, but does not do so, will not, I think, estop B from pursuing that claim in subsequent litigation. That seems to me to appear clearly from Caird v. Moss

where a claim for rectification of an agreement was said not to be barred as re judicata by litigation on the agreement itself".

A cause of action is a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person (per Diplock, L.J. in Letang v. Cooper

(1964) 2 All E.R. 929, at p. 934). The cause of action in Action No. 5056/74 was for price of goods sold and delivered and/or account stated. The judgment of the Court is for goods sold and delivered. It is based on invoices and a cheque. [*374]

The cause of action in the present case is breach of the contract dated 26.2.1974. It is a completely different cause of action from the cause of action in the previous litigation. The plaintiff is not barred by the default judgment. He was indebted in the amount claimed in the previous case. He might have raised a counterclaim; but his failure to do so does not preclude him from filing an independent action. Neither the cause of action nor the issues raised in the present action were at all determined by the Court in the previous action. Therefore, the plea of res judicata fails. The application to set aside the judgment was dismissed, having, been withdrawn. This dismissal did not determine anything and therefore the applicant is not barred in any way.

(B) ESTOPPEL IN PAIS

If a man by his words or conduct wilfully endeavours to cause another to believe in a certain state of things which the first knows to be false, and if the second believes in such state of things and acts upon his belief, he who knowingly made the false statement is estopped from averring afterwards that such a state of things did not in fact exist. If a man, whatever his real meaning may be, so conducts himself that a reasonable man would take his conduct to mean a certain representation of facts and that it was a true representation, and that he was intended to act upon it in a particular way, and he with such belief does act in that way to his damage, the first is estopped from denying that the facts were as represented. To form the basis of an estoppel a representation may be made either [*375] by statement or by conduct; and conduct includes negligence and silence.

In Covell v. Sweetland (1968)

2 All E.R. 1016, the plaintiff’s failure to disabuse the defendant of his belief, evinced in correspondence with the plaintiff, that his maintenance obligation would cease on her re-marriage, estopped the plaintiff from later denying that the fact was as represented.

We have gone through the record of the file of action No. 5056/74. We have found nowhere in any document filed or any statement made by or on behalf of the defendant in that action until the date of the filing of this present action, any representation or act which could form the basis of an estoppel in pais. In the supplementary affidavit in support of the application to set aside the default judgment it is made clear that the present plaintiff intended to pursue the claim for damages for breach of the contract by the other side. The arrangement for payment by instalments of the judgment-debt in the previous action does not form the basis of estoppel by conduct for two reasons: (a) nowhere in the record we could trace any representation that the present plaintiff abandoned his claim for damages for breach of contract; and (b) that settlement was made after the institution of the present action which the present plaintiff prosecuted.

In the result the plea of res judicata and estoppel by conduct fail. The costs of hearing of these issues are awarded against the defendant, to be paid at the final determination of the action.

Plea of res judicata and

estoppel fail. Costs against

the defendand.