Para No
Introduction [1]
Issues [2]
Factual background [12]
The contract [13]
The 2001 proceedings [26]
Period one [34]
Period two [38]
Period three [39]
Are the issues in the 2007 proceedings the same as those
in the 2001 proceedings? [41]
The present proceeding [53]
Discussion [54]
Conclusion [67]
Cause of action estoppel [69]
Issue estoppel [70]
Henderson v Henderson [85]
Can the Crown reverse its revision of invoices in periods
two and three? [95]
Result [100]
Costs [101]

Introduction

[1] This is an appeal against a decision of Associate Judge Gendall relating to a dispute between the respondent (to whom we will refer as the Crown) and the appellant (Contact) relating to a gas sale contract between the parties (the contract): Attorney General v Contact Energy Limited HC WN CIV-2007-485-1960 21 July 2008. The Crown claimed that money was owing to it under the contract and also sought declarations as to its rights under the contract. Contact applied for summary judgment or alternatively for an order that either or both of the Crown’s claims be struck out. Those applications failed in the High Court and Contact now appeals to this Court.

Issues

[2] Broadly speaking, the Crown’s claims are based on its contention that it is entitled to reopen invoices under the contract in some circumstances, including where the index which underlies the gas pricing provision, the Producers Price Index (PPI), is revised. There have been three relevant revisions, relating to three separate periods. The Crown’s revisions increase Contact’s liability for period one, decrease it for period two and increase it for period three. We will explain what these periods are later.
[3] The Crown claims Contact owes it the sum representing the difference between the amount for which the Crown originally invoiced Contact and the amount which would be payable if the revision to the index affecting period one is taken into account.
[4] The first issue is whether the Crown is entitled to reopen invoices as described at [2] above. That is an issue of interpretation of the contract.
[5] However, the principal issue in relation to this aspect of the appeal arises from the fact that an earlier dispute between Contact and the Crown relating to the contract was the subject of litigation in the High Court, this Court and the Privy Council (we will call this the 2001 proceedings). Contact argues that the Crown’s claim for money owing under the contract cannot succeed because it raises issues that were determined in the 2001 proceedings. It says that it therefore has one or more of the following defences available to it:

(a) Cause of action estoppel;

(b) Issue estoppel;

(c) The rule in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100; 67 ER 313.

[6] The primary focus of the appeal is, therefore, whether the Crown’s claim in relation to period one has the same subject matter as the 2001 proceedings. Once that issue is resolved, we must consider whether any of the above defences provide an answer to the claim such that either summary judgment should be entered or the claim should be struck out.
[7] In the event that it is unsuccessful in relation to period one, the Crown seeks a declaration to the effect that it has undercharged Contact in period one and may reissue invoices to rectify this. The invoices would be for the net amount of the benefit to Contact in period two minus the benefit to the Crown in period three. Contact resists that claim too. In effect, it says the Crown was wrong to make the revision advantaging Contact for period two, but that it should not now be permitted to correct it.
[8] As Contact had disputed the Crown’s right to reissue the period one invoices based on revisions to the PPI, the Crown, in giving Contact the benefit of favourable PPI revisions in relation to period two, reserved its right to recover the larger sum originally invoiced should its position in relation to revisions not be upheld. The issue arising from this is whether there was an agreement relating to the Crown’s reservation of position or whether the Crown is otherwise entitled under the contract to reverse the revision in relation to period two.
[9] The parties agreed in the hearing before us that their positions in relation to the contractual interpretation issue described at [4] above is now fluid and possibly affected by matters that have arisen since the High Court hearing. They did not seek resolution of that issue on appeal, and we therefore say no more about it.
[10] We record the procedure followed by Contact to place before this Court its challenge to the Associate Judge’s decision on both the summary judgment application (in respect of which there is a direct appeal to this Court) and the strike out application (in respect of which there is a right of review to a High Court Judge). Contact sought review of the strike out decision and successfully applied for that review proceeding to be removed into this Court for hearing. So both issues are properly before us.
[11] Before dealing with the above issues, we will set out the factual background.

Factual background

[12] The Associate Judge accurately summarised the factual background and what follows substantially reproduces that summary.

The contract

[13] The Crown purchases gas from the Maui Gas Field under a contract known as the Maui Gas Contract. It then sells the gas under six downstream contracts. The contract at issue in this case is one of those six downstream contracts.
[14] On 5 July 1990, the Crown entered into that downstream contract with the Electricity Corporation of New Zealand Ltd. Contact succeeded Electricity Corporation as the purchaser of gas in 1996 by virtue of an assignment under s 23 of the State-Owned Enterprises Act 1986. The result is that Contact purchases Maui gas from the Crown under the contract.
[15] The contract is already a long-standing one. Its provisions have a degree of complexity and have already been the subject of substantial litigation. Under cl 9.1.1 of the contract, Contact agrees to buy “Base Gas” from the Crown (at the annual quantities defined in Schedule 1, Column (i) or Schedule 2, Column (i) for the years 1989 to 2009). Clause 9.3.1 requires Contact to pay to the Crown:

(a) The Maui Gas Price – an upwardly variable figure set under the Maui Gas Contract by the Maui Partners and the Crown; plus

(b) The Energy Resources Levy – a fixed sum of $0.45 per gigajoule (GJ) of gas; plus

(c) The “Crown Margin” – a changeable margin on the gas Contact buys, fixed or determined on six-monthly “Adjustment Days”.

[16] The “Adjustment Days”, defined as the last day of each “Pricing Period” –

successive six month periods commencing on 1 October 1989 – are 31 March and 30 September each year. In practice, however, the parties have always treated 1 April and 1 October as the Adjustment Days. Nothing turns on this point.

[17] The Crown Margin is defined in cl 1.2 in the following way:

“Crown Margin” means, at any time, an amount for a GJ [gigajoule] of Gas equal to:

(a) NZD2.225 as adjusted by application of Cl 9.5; less

(b) the aggregate of the Maui Gas Price and NZD0.45 [ie the Energy Resources Levy], in each case, for each GJ of Gas.

[18] Clause 9.5.1 provides the formula for adjusting the Crown Margin over time, as follows:

On each successive Adjustment Date the Crown Margin payable for each GJ of Base Gas under Clause 9.3.1 shall be adjusted by:

(a) multiplying an amount equal to NZD2.225 by the quotient obtained by dividing PPI by the Initial PPI; and then

(b) deducting from the product an amount equal to the Maui Gas Price and NZD0.45.

[19] The Initial PPI is defined as a fixed number, 1600, being the PPI for the quarter ended 30 June 1989. PPI is defined in cl 1.2 as meaning:

... on any Adjustment Day, the index number shown in the index for the last quarter in respect of which the index has been published and publicly released that ended no less than 3 months prior to such Adjustment Day: for this purpose the index is the Producers Price Index Inputs (all Industries) as from time to time published as table PPIQ.SI9 in the Key Statistics published by the Department of Statistics ... and if that index is no longer published then such other index or its equivalent as may be agreed to by and between [Contact] and the Crown...

[20] The PPI is a price index used to measure inflation in the productive sector of the economy. The 2001 proceedings dealt with a dispute about what PPI meant.
[21] Statistics New Zealand (SNZ) calculates and publishes the PPI on a quarterly basis, with the quarters ending 30 May, 30 June, 30 September and 31 December in each year. The PPI numbers published not less than 3 months before the Adjustment Days (cl 1.2 of the contract) are therefore those published on 31 December (for the 1 April adjustment) and 30 June (for the 1 October adjustment).
[22] Clauses 12.5.1 and 12.5.2 specify what the Crown is to do on each Adjustment Day:

12.5.1 On each successive Adjustment Day, and after making any adjustment required by Clause 9.5, the Crown shall calculate the amount payable on account of [the] Crown Margin in respect of each Month in the next succeeding Pricing Period (the “monthly amount”) by applying the following formula...

12.5.2 The Crown shall notify [Contact] of a monthly amount calculated in accordance with Clause 12.5.1...

[23] The formula in cl 12.5.1 for the monthly amount is the annual Base Gas in GJs, divided by the number of months in question, multiplied by “the Crown Margin for the time being known”.
[24] Clause 12.5.3 provides that Contact must pay the monthly amount calculated in accordance with cl 12.5.1 and allocated to each month in the Pricing Period on the 20th day of the month following the month to which it is notionally allocated.
[25] Clause 12.6.2 provides for a reopening of invoices to remedy any overcharging or undercharging by the Crown:

If within 2 Years after the date of any invoice or statement delivered under this Clause 12 it is found that [Contact] has been either undercharged or overcharged the matter may be reopened and after any set-off the appropriate adjustment made by [Contact] either paying the amount of the undercharge or being given a refund by the Crown of the amount of the overcharge. ...

The 2001 proceedings

[26] At the start of the contract the parties agreed to use the Producers Price Index Inputs (all Industries) as published from time to time as table PPIQ.SI9 (SI9) in the publication Key Statistics which SNZ publishes.
[27] In 1995 SNZ decided to redevelop the PPI. As such, it stopped publishing the SI9 index in Key Statistics after August 1996. The index was, however, still calculated and provided on request until the quarter ending 30 September 1999.
[28] The parties to the contract used SI9 according to cl 1.2 of the contract until and including the 1 October 1999 Adjustment Day (using the 30 June 1999 SI9). They also agreed that PPIQ.SN9 (SN9) should be the replacement index, with effect from the next Adjustment Day, namely 1 April 2000. However, in 2001 the parties could not agree on how to effect this change. This led to the 2001 proceedings.
[29] In the 2001 proceedings, Contact argued that SN9 should simply replace SI9. As already noted, Initial PPI was fixed in the contract at 1600 (being the PPI for the quarter ended 30 June 1989) whereas SN9, having a base of 1000 at December 1997, was 863 at June 1989. As such, Contact said that to use the initial PPI of 1600 the figures in SN9 should be scaled by a factor of 1600/863. Conversely, the Crown said that there should be no break: SI9 and SN9 should be linked by “splicing” SI9 and SN9 together so they formed a continuous line. Where the indices had different base numbers, one would have to be “rebased” so that they had the same value at the link date. The resulting ratio – the “link factor” – would then be applied to the published numbers from the SN9 index to give a quarterly value relative to the original SI9 index series. An essential difference between the approaches was that Contact’s approach would have meant a “jump down” at the date of the change over, which would have benefited it by over $2.2 million.
[30] The Crown issued invoices to Contact based on its linking approach and Contact refused to pay (at least in full). The Crown sued. The High Court and this Court found in favour of the Crown’s approach. Contact appealed again, this time to the Privy Council. The Privy Council held that the contract did not specify how a transition from one index to another should be effected and, in the absence of such a provision, the parties were assumed to have intended that the transition would be according to normal commercial practices. In light of the expert evidence led by the Crown that its approach was usual practice when an index was changed, the Privy Council also found for the Crown.
[31] A second issue in dispute in the 2001 proceedings was when the index should have been linked. The Privy Council again upheld the Crown’s position that the linking should be at September 1999 (when the last SI9 value was published), as opposed to June 1999 (the last SI9 value used under the contract).
[32] In the 2001 proceedings, the matters at issue were listed in an agreed statement of issues. Issues 1 - 4 concerned how to effect the transition between indices, and issue 5 became irrelevant in light of the answer to issue 3. Issues 6 - 8 were questions concerning the PPI numbers to be used, the amounts properly owing and the total unpaid debt. These questions, and Goddard J’s answers (which were not disturbed on appeal), are set out below at [44].
[33] The PPI revisions that occurred after the 2001 proceedings and the consequences of them are best explained by reference to the periods described at [2] – [8] above.

Period one

[34] The Crown invoiced Contact for each month between April 2000 and September 2001, basing the invoices on the published SN9 numbers for the quarters ended 31 December 1999, 30 June 2000 and 31 December 2000. After the 2001 proceedings were determined, Contact paid those invoices in full.
[35] On 30 August 2001, SNZ published and publicly released a revision to SN9, which applied retrospectively to the quarters June 1999 to March 2001. The changes reflected in the revised SN9 affected the link factor as ascertained in the 2001 proceedings, changing the denominator in the link factor of 1897/1014 to 1016. The parties made this change by agreement. However, the Crown says that the revisions also had the effect of increasing the PPI numbers to be used in calculating the Crown Margin. On 5 September 2001 the Crown indicated that it would reopen the monthly invoices for period one, purporting to exercise its right under cl 12.6.2 of the contract.
[36] The Crown did not reissue the invoices for period one until 1 July 2002, some nine months after its statement of its intention to do so. The Crown says this was because it expected the SI9 index to be revised, in Contact’s favour. This did not occur.
[37] The difference between the amounts paid by Contact under the invoices issued after the 2001 proceedings and the amount it was required to pay under the revised invoices was $711,818.77 (including GST).

Period two

[38] Another revision to the SN9 index was made on 28 May 2003, retrospectively revising the published SN9 index numbers for the quarters September 2000 and December 2000. The effect of the revision was to reduce the index numbers, and thus Contact’s liability. The Crown advised Contact of the revision on 4 June 2003 and provided its calculations of the amounts due by Contact for April 2003 to September 2003 on the basis of their revised numbers. But it also expressly reserved the right to reissue invoices and attain payment for the monthly amounts due in period two based on the unrevised SN9 index if it was later determined that the revised numbers could not be used. There was correspondence between the Crown and Contact recording the Crown’s reservation of position and Contact’s acceptance of the reduction in the Crown Margin (but without prejudice to its view of the correct adjustment of the Crown Margin). The net effect of the change was to reduce Contact’s liability by $224,084.44.

Period three

[39] On November 2003, SNZ revised the SN9 index number for the June 2003 quarter. The revision increased Contact’s liability by $37,983.49 for the period between October 2003 and March 2004. The Crown issued monthly invoices to Contact on 5 December 2003 and thereafter on the basis of the revision. Contact paid these invoices.
[40] We now turn to the issues identified above.

Are the issues in the 2007 proceedings the same as those in the 2001 proceedings?

[41] The Crown’s claim in the 2001 proceedings was in breach of contract, in that Contact had failed to pay in full invoices issued from April 2000 to November 2001 (inclusive). Whether Contact was in breach turned on whether the invoiced amounts were correctly owing under the contract, and this, in turn, depended on the proper method of transition from the SI9 index to the SN9 index: see [29] – [30] above. The Crown sought an order that Contact pay the invoiced sum (plus interest) and three declarations, namely:

(a) A declaration that SI9 continued to be published for the purposes of the contract until the September 1999 quarter;

(b) A declaration that on the Adjustment Date on 1 October 1999 the relevant PPI for the purposes of calculation of adjustment of the Crown Margin under the contract was SI9; and

(c) A declaration that on the Adjustment Date on 1 April 2000 and on all subsequent Adjustment Dates the relevant PPI for the purposes of calculation of the adjustment of the Crown Margin under the contract was SN9, rebased so that it equals SI9 for the quarter ending 30 September 1999.

[42] In her judgment, released on 18 April 2002 (Attorney-General v Contact Energy Limited HC WN CP116/01), Goddard J dealt sequentially with three key issues. These were:

(a) Were the parties contractually bound to use SI9 until no longer published, or could that index be used only so long as it was published by SNZ in Key Statistics? Goddard J held that the parties were bound to use SI9 for as long as SNZ calculated and made it available (even if only on request). Thus, SI9 had to be used up until and including the quarter ending 30 September 1999.

(b) In the alternative, did the parties agree to continue using SI9 even after it ceased to be published in Key Statistics? Given the answer to the first issue, the Judge did not strictly need to address this question. Nonetheless, she would have found that the parties had agreed to continue using SI9 after SNZ stopped publishing it in Key Statistics.

(c) How was the Crown Margin to be calculated from and including the Adjustment Date of 1 April 2000? This was the most substantial issue for resolution. The Judge concluded that the transition from SI9 to SN9 was to be effected by linking the two indices as at 30 September 1999. This linking was to be done in the way contended for by the Crown: the PPI value for each Adjustment Date was to be determined by multiplying the appropriate SN9 value by a link factor of 1897/1014.

[43] Goddard J’s findings on these issues were sufficient to resolve the case: they supplied the mechanism for determining the Crown Margin for any given period.
[44] The Judge then went on to provide answers to the agreed list of eight issues: see [32] above. Her answers for issues 6 – 8 were as follows:

What is the PPI index number for each Adjustment Date calculation?

(a) for 1 April 2000: 1925

(b) for 1 October 2000: 1974

(c) for 1 April 2001: 2121

(d) for 1 October 2001: 2144

(e) for each successive Adjustment Date, the appropriate SN9 index number scaled by a link factor of 1897/1014

Using the Initial PPI index number and the PPI index number determined by the Court in respect of the relevant Adjustment Dates, what amounts did Contact owe to the Crown on each of the invoices dates listed in paragraph 30 of the second amended statement of claim?

(a) For the 1 April 2000 Adjustment Date and the six successive months thereafter: $3,222,835.000 (ex GST).

(b) For the 1 October 2000 Adjustment Date and the six successive months thereafter: $3,213,7700.83 (ex GST).

(c) For the 1 April 2001 Adjustment Date and the five successive months thereafter: $3,691,200.83 (ex GST).

(d) For the 1 October Adjustment Date and the month of October 2001: $2,434,688.74 (ex GST).

What, if any, debt owed by Contact to the Crown remains unpaid?

The sum of $2,253,185.90 (incl GST) (ex interest).

[45] These answers derived from the numerical application of the Judge’s transition methodology. Thus, the PPI index values given for issue six were the product of the SN9 index value for the relevant quarter (these values were common ground between the parties) and the link factor (as determined by the Judge). Similarly, the values arrived at under issue seven were derived by plugging the index values from issue six into the contractual formula for calculating the Crown Margin. The sum of these values, less the amount already paid by Contact, provided the answer to the eighth agreed issue.
[46] Goddard J then gave judgment for the Crown in the exact form sought in its statement of claim:

[83] Judgment is entered for the Crown in the sum of $2,253,185.90 (inclusive of GST) together with interest on the sum outstanding in relation to each invoice rendered from June 2000 up to and including January 2002. The following declarations are also made:

(a) S19 continued to be published for the purposes of the Contract until the September 1999 quarter.

(b) On the Adjustment Date of 1 October 1999 the relevant PPI for the purposes of calculation of adjustment of the Crown Margin under the Contract was S19.

(c) On the Adjustment Date of 1 April 2000 and on all subsequent Adjustment Dates the relevant PPI for the purposes of calculation of the adjustment of the Crown Margin under the Contract was SN9, rebased so that it equals S19 for the quarter ending 30 September 1999.

[47] As noted above at [35], the first relevant revision of SN9 occurred on 30 August 2001. The status of the revised SN9 values were not, however, in issue in the 2001 proceedings (notwithstanding that the hearing for that case commenced on 10 December 2001). That is a matter of controversy in this case to which we will revert later.

Events subsequent to the 2001 proceeding

[48] Two weeks after the release of Goddard J’s judgment, Contact wrote to the Crown. The letter began by referring to the Judge’s conclusion on how to calculate the Crown Margin. It then went on as follows:

SN9 for the quarter ending September 1999 is 1016 and SI9 for the same quarter is 1897. The scaling factor used in rebasing SN9 is therefore 1897/1016.

Because the amount of the invoice for October gas is included in the amount of $2,253,185.90 for which judgment has been entered, it is too late for Contact to have that recalculated. However, the invoices for gas supplied from 1 November 2001 have clearly not been calculated in accordance with paragraph 83(c) of the judgment and they will need to be recalculated.

[49] The letter concluded with the following sentence:

Please note that what I have said in this letter is without prejudice to Contact’s right to appeal the High Court judgment and have the amounts readjusted if it succeeds on appeal.

[50] This revision to the link factor had the effect of reducing the amount payable by Contact by an estimated $1.9 million up to June 2009. Despite the inconsistency of this link factor with that identified by Goddard J in her answer to agreed issue six (1897/1014 rather than 1897/1016), the Crown agreed to the revision.
[51] On 1 July 2002, the Crown issued “replacement” invoices for the months covered by period one. It expressed its view that it was entitled to issue new invoices on the basis of a proper interpretation of the contract (namely, the definition of PPI) and the right given by cl 12.6.2. The invoices were based on all of the relevant revisions to SN9, not only the revision to the September 1999 figure, which affected the link factor. Each invoice set out the total amount that the Crown claimed was properly due (rather than the outstanding balance) for the month in question and concluded by requesting that Contact pay the difference between the total shown and the sum previously paid for that month.
[52] Contact did not pay the amounts requested.

The present proceeding

[53] In the present proceedings, the Crown brings its claim in debt on the basis that Contact has failed to pay the additional amounts owing. The Crown claims that it was entitled to reopen the invoices under cl 12 of the contract and, upon issuing the new invoices, the sum owing fell due. This claim is therefore based on invoices separate and distinct to those on which its debt claim in the 2001 proceedings was based.

Discussion

[54] Counsel for Contact, Mr Chapman, submitted that the cause of action brought by the Crown in the present proceedings was identical to that brought in the 2001 proceedings. Both, he argues, concern the same debt: the amount properly owing for the months in question. That the debt has been recalculated in the present proceedings does not, in Mr Chapman’s submission, create a new debt.
[55] The Associate Judge rejected this argument. He found that the present claim for payment of the amount owed in relation to the reissued invoices was not precisely the same as the cause of action determined in the 2001 proceedings. He said there was a reasonable argument that intervening circumstances had occurred giving rise to a new contractual right that the Crown was now seeking to enforce.
[56] Mr Chapman relied on Security Retirement Pty Ltd v Twibill Architects Pty Ltd [2005] NSWCA 325, particularly the minority judgment of Young CJ in Eq. That case concerned a claim by architects for fees owing to them from a property developer. The agreement in issue was complex and convoluted.
[57] Under the agreement, the developer was required to make progress payments to the architects at certain specified times. Quantification of the first tranche of payments (the ones in issue) depended on an estimate of the total cost of the development, as payment fell due prior to the acceptance of a tender for the project; later tranches, in contrast, were to be quantified on the basis of the actual total cost of the development. If, however, the architects’ services were terminated prior to completion of the project, cl C1.01(d) provided that the progress payments made up to that point were to be adjusted:

Progress payments shall be payments on account and subject to adjustment in accordance with the final cost of the Works. Where the Architect’s services are terminated prior to completion of the Works, progress payments are adjusted in accordance with the most advanced stage reached....

[58] As it happened, the development did not go ahead and the architects’ services were terminated prior to completion. The progress payments that had been made therefore needed to be adjusted, resulting in an additional amount of approximately $106,000 falling due.
[59] The developers ran a limitation defence. Its success depended on when the architects’ cause of action accrued, which, in turn, depended on whether the adjustment had given rise to a new debt and therefore a new cause of action. Bryson JA, with whom Mason P agreed, delivered the leading judgment. He concluded at [37] that cl C1.01(d) produced an entitlement in addition to the progress payments already made, which resulted in a new debt and a new cause of action different to whatever entitlement and cause of action may have earlier existed for the progress payments. This cause of action accrued no earlier than the date on which the architects’ services were terminated. Accordingly, the claim was not time-barred.
[60] Young CJ, while concurring in the result, wrote separately. He agreed that the key issue was whether the adjustment created a new debt and a new cause of action. He dealt with this issue in the following way:

[45] It is quite clear on the authorities, that the cause of action in respect of a progress payment arises when the progress payment is due and payable; see eg Pickering v Ilfracombe Railway Co (1868) LR 3 CP 235.

[46] It is also clear that if the claim to a principal debt is barred, so also is any claim for interest, adjustments or other accessory amounts, unless the latter are the subject of a separate and distinct covenant; see eg Hollis v Palmer [1836] EngR 646; (1836) 2 Bing NC 713; 132 ER 275; Cheang Thye Phin v Lam Kin Sang [1929] AC 670 (PC) and Re Otway Coal Co Ltd [1953] VicLawRp 74; [1953] VLR 557 at 565.

[47] The fact that some additional damage occurs after the cause of action accrues or that some circumstance changes which redetermines the amount, does not affect the date of accrual of a cause of action: The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547.

[48] In the ordinary case of breach of contract, one can have successive breaches of a covenant which will each create a new cause of action. The usual example is successive breaches of a covenant to pay rent; see eg Archbold v Scully [1861] EngR 510; (1861) 9 HLC 360; 11 ER 769. However, with a promise to pay a debt, there can only be one breach and that occurs when the debt is not paid as and when promised. Even with a debt, repayable on demand, there is only one time of accrual of the cause of action, namely when the debt is incurred, notwithstanding that interest accrues after that date: Norton v Ellam [1837] EngR 183; (1837) 2 M & W 461; 150 ER 839.

[49] In Australia and New Zealand Banking Group Ltd v Douglas Morris Investments Pty Ltd [1992] 1 Qd R 478 at 489, McPherson J said:

With respect to the particular indebtedness comprehended by that demand, the limitation period begins to run; and that it cannot be made to commence again by making a fresh demand which incorporates the old indebtedness as a part of the new balance. Quite plainly, time cannot repeatedly be set running again by the simple expedient of making successive demands for precisely the same amount of balance....

[50] As the case most recently cited shows, it is difficult to read all the cases on when time runs with guaranteed running accounts with financial institutions without getting the impression that there are inconsistent approaches to the problems. However, the key is to consider the precise wording of the contract in question as to what is the debt that is being created.

[51] Thus, the vital question is whether, on the true construction of the contract, the present claim is for an adjustment of the progress payment or a separate and new claim.

[61] He then concluded that, on the true construction of the contract and for the reasons given by Bryson JA, the claim for an adjusted amount was a separate and new claim.
[62] Mr Chapman argued that this case stood for the proposition that merely issuing a new invoice does not create a new cause of action, even where there has been a change of circumstances that redetermines the amount properly due.
[63] It is noteworthy, however, that the Court in Twibill unanimously held that the right in that agreement to adjust past progress payments created a new debt and therefore a new cause of action. Assuming that cl 12.6.2 of the contract between Contact and the Crown gives the parties the ability to reopen invoices and adjust the amount properly due for a given month, the present situation would appear to be indistinguishable. Both contracts provide a right to adjust amounts for which invoices have previously been issued and paid. These adjustments will give rise to new debts, which may be owed to either party.
[64] The fact that the right to reopen invoices in the present case is contained in a distinct contractual clause suggests that this entitlement is secured by a “separate and distinct covenant”: Twibill at [46]. This is an important point, as it distinguishes the present case from those in which there was no such distinct contractual right.
[65] Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 is such an example. In that case, the respondent brought proceedings in respect of income tax assessments for a certain period. The amount claimed, due to an error in placing the decimal point, was $25,550 instead of the $255,500 properly owing. Unsurprisingly, the taxpayer consented to judgment being entered for the amount sought (approximately 10 per cent of the assessed amount). Four days later, the respondent brought proceedings seeking the remaining tax of $230,000. The High Court of Australia held that the respondent’s cause of action was precisely the same as that for which judgment had already been received and, for this reason, the doctrine of res judicata prevented the latter claim succeeding. In Chamberlain, however, there was no independent right, contractual or otherwise, to sue for an additional amount; nor had there been any change of circumstances affecting the amount properly owed for the period in question; the error was that of the respondent, and his only potential remedy was to seek to have the original judgment set aside as having been entered by mistake.
[66] We see Twibill as supporting the Crown’s position and Chamberlain as distinguishable. Moreover, the approach contended for by Mr Chapman would allow an obstinate party to subvert the contractual adjustment provisions. A refusal to pay, followed shortly thereafter by successful summary judgment proceedings, would deprive the other party of its right to reopen the invoice at a later stage (see, for example, the comments in Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 at [60] (CA)). The cause of action in debt would, on Mr Chapman’s argument, merge in the judgment delivered and thus destroy its independent existence: Chamberlain at 510. Such a result would clearly defeat the contractual intention underlying the right in cl 12.6.2 to reopen invoices within a two-year window.

Conclusion

[67] We conclude that the claim in the present proceedings by the Crown is a claim for a different debt and does not involve the same issues as were decided in the 2001 proceedings.
[68] Having reached that conclusion, we now turn to the specific defences which Contact raised, and which it said ought to have entitled it to entry of summary judgment or to the striking out of the Crown’s claim.

Cause of action estoppel

[69] The defence of cause of action estoppel depended on the Court finding that the questions in issue in the present proceedings had already been judicially determined in the 2001 proceedings. In the light of our finding that the debt claimed in the present proceedings differs from that claimed in the 2001 proceedings, this defence fails.

Issue estoppel

[70] This was a more focussed defence, based on the answers given by Goddard J to agreed issue 6, in which she set out the PPI numbers to be applied on each Adjustment Date in the relevant period. Contact accepted that the Associate Judge had correctly identified the law relating to issue estoppel, but argued that he had wrongly applied the law to the facts of this case.
[71] An issue estoppel will apply to prevent a party from arguing against a precise finding made against that party in an earlier proceeding. The requirements for issue estoppel to apply were expressed by this Court in Talyancich v Index Developments Ltd [1992] 3 NZLR 28 at 37:

Issue estoppel arises where an earlier decision is relied upon, not as determining the existence of non-existence of the cause of action, but as determining, as an essential and fundamental step in the logic of the judgment, without which it could not stand, some lesser issue which is necessary to establish (or demolish) the cause of action set up in the later proceedings....

[72] Mr Chapman accepted that the Associate Judge had correctly identified the requirements for an issue estoppel, citing the earlier decision of this Court in Joseph Lynch Land Co v Lynch [1995] 1 NZLR 37 at 41 and the classic definition of issue estoppel given by Diplock LJ in Thoday v Thoday [1964] P 181 at 198 (CA). However, he said that the Associate Judge had taken a “big picture” approach to the doctrine (that is, focussing on what the 2001 proceedings were really about) which was not mandated by the authorities.
[73] The essence of Mr Chapman’s argument was that if a narrower approach to issue estoppel were adopted, the numbers determined by Goddard J and set out in the answer to agreed issue 6 (above at [44]) were matters which had been “distinctly put in issue” and had been “solemnly and with certainty determined”. He said that this meant the Crown was now estopped from challenging those numbers in a subsequent proceeding because it was contending the contrary of precise points determined in the 2001 proceeding.
[74] For the Crown, Mr Kos QC said that the August 2001 revisions, the consequences of them and the debts which arose under the invoices issued by the Crown in July 2002 were not in issue in the 2001 proceeding, and therefore cannot be the subject of issue estoppel. He said that Contact had itself treated the answers given by Goddard J to agreed issue 6 as less than final, because it had contended for, and obtained, a change to the link factor which Goddard J had determined (see [48] – [50] above). In any event, Mr Kos pointed out that there was nothing in the judgment of Goddard J which could be interpreted as over-riding the right that either party had under cl 12.6.2 of the contract to reopen an invoice. He said that the question as to whether the definition of PPI in the contract included revisions of the PPI released subsequently to the initial release was not before the Court in the 2001 proceedings.
[75] The Associate Judge found that Contact had not established that the Crown could not succeed because of an issue estoppel. He said the Crown was not arguing that the answers given by Goddard J were wrong but rather that the revision of the PPI has given the Crown a new right to be paid a different debt by Contact.
[76] The essence of this issue is whether the issue which the Crown raises in the present proceedings was fundamental to the determination of the 2001 proceedings and was finally determined. In our view the answer to that question is no. What the Crown sought in the 2001 proceedings was the payment of a debt owed, based on the original invoices issued for the relevant period. In order to determine that issue, the Court had to determine the proper method of transition from the SN9 index to the SI9 index. That, in turn, required determination of two other issues. The first was whether the SI9 index continued to be published for the purposes of the contract until the September 1999 quarter. The second was whether the SI9 index was the relevant PPI to be used on the 1 October 1999 Adjustment Date.
[77] Those issues were finally determined by Goddard J and were fundamental to her decision as to whether Contact was liable to pay the amount which the Crown claimed in the 2001 proceedings.
[78] However, the answers Goddard J gave to agreed issue 6 are not, in our view, in the same category as those issues. They were simply a mechanical application of the transition methodology to the PPI index numbers which were in evidence before her. She did not determine the PPI index numbers for the months in question or, to the extent that she did (in accepting the evidence on that point), she did not make any determination about the right of either party to contend for revised numbers under another provision of the contract.
[79] As mentioned earlier, the present proceedings involve amounts said to be owed under different invoices from those in issue in the 2001 proceedings for amounts that were not owing at the time of those proceedings. While the Judge finally determined the rights of the Crown in respect of the invoices in issue in the case before her, it cannot be said that she has also done so in relation to any revised invoices issued by the Crown under cl 12.6.2.
[80] In Talyancich at 38, this Court cited with approval a test suggested in Spencer Bower and Turner The Doctrine of Res Judicata (2ed 1969) at 182 to determine whether an issue estoppel applied. That test was whether it was possible to appeal against the finding which was being put forward as founding the estoppel. The Court said that if there could be no effective appeal against the particular determination, it was impossible to regard it as fundamental to the judgment.
[81] It seems to us to be clear that the Crown could not have appealed the answer given by Goddard J to agreed issue 6 because that answer involved her making a finding on the linking methodology in accordance with the Crown’s contention, and adopting numbers from the indices in question which were not in dispute by any party. In our view, that supports the finding that no issue estoppel arose in this case.
[82] Having found no issue estoppel arose, it is not necessary for us to go on to consider a subsidiary point which was dealt with by the Associate Judge. At [76] of his judgment, he referred to an exception to the rule of issue estoppel affirmed by the House of Lords in Arnold v National Westminster Bank plc [1991] 2 AC 93 at 109 per Lord Keith:

[T]here may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings.

[83] As it had in the High Court, Contact submitted that this exception could not apply because there was no such new relevant material in this case. The basis for this argument was that the Crown knew prior to the High Court hearing in 2001 of the intention to revise the SI9 index, and it is those revisions which are now the foundation of the Crown’s argument. He said the Crown either knew this information or could have obtained it with reasonable diligence. Thus the exception did not apply.
[84] The Crown disputed this, relying on an affidavit by the administrator of the contract from its point of view, Mr McKenzie. We discuss this evidence in more detail below. Although he was not required to decide the point given his conclusion that no issue estoppel applied, the Associate Judge said that, if he had been required to do so, he would have found that it was inappropriate to deal with the matter in a summary judgment context. We would have done likewise.

Henderson v Henderson

[85] Finally, Contact argues that even if the Crown is not estopped by cause of action estoppel or issue estoppel, the extended doctrine of res judicata applies (also known as the rule in Henderson v Henderson). This extended doctrine, which is really a type of abuse of process, is often traced to the following passage in the judgment of Sir James Wigram VC in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100 at 115; [1843] EngR 917; 67 ER 313 at 319:

[W]here 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 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 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.

[86] The doctrine was most recently and authoritatively examined in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL). After an extensive analysis of the leading English authorities, Lord Bingham made the following observations at 31:

But 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 twice vexed 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 the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding 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 early 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.

(Emphasis added)

[87] These passages from Henderson v Henderson and Johnson were quoted with apparent approval by this Court in Commissioner of Inland Revenue v Bhanabhai [2007] 2 NZLR 478 at [58] – [60]; see also Lai v Chamberlains [2007] 2 NZLR 7 at [59] (SC). Both Contact and the Crown accept them as accurately summarising the law.
[88] Mr Chapman argued that, since the Crown knew of the revisions to the PPI values for period one prior to the hearing of the 2001 proceedings, it should have brought its claim for any increased amount owing in those proceedings. He submitted that the revisions to the PPI were “intimately connected with” the 2001 proceedings (Bryant v Commonwealth Bank of Australia [1995] FCA 1299; (1995) 57 FCR 287 at 298 (FCA)), in that they affected the correctness of the amounts claimed by the Crown. Accordingly the Crown could, and should, have pursued its alleged right of retrospective price revision in those proceedings.
[89] Mr Kos acknowledged that, at the latest, on 5 September 2001, the Crown was aware of the revisions to the SN9 index. This was the date on which the Crown wrote to Contact giving notice of its intention to reopen the period one invoices (see [35] above) and was prior to the Crown filing its second and third amended statements of claim in the 2001 proceedings. Mr McKenzie’s evidence is that he delayed issuing new invoices until July 2002 because he expected that SNZ would also revise the SI9 number for the September 1999 quarter. Some support for this explanation is found in the following passage of his letter:

It is also possible that the PPIQ.SI9 index that preceded the use of the SN9 index has also been revised and we are seeking Statistics New Zealand advice on that matter.

[90] In the event, SI9, as a discontinued index, was not revised.
[91] In an affidavit, Mr Love, the gas markets manager for Contact, questioned Mr McKenzie’s explanation for the delay in issuing the new invoices. The overall drift of his evidence is that the explanation is a recent invention or, possibly, that Mr McKenzie did not take reasonable steps to find out whether SNZ intended to revise SI9.
[92] The Associate Judge said there was a reasonable argument that it was circumstances since the resolution of the 2001 proceedings that led to the present proceedings. He was not convinced that the Crown was required to raise the present issue in the 2001 proceedings. Nor was he convinced that there had been any prejudice to Contact from the Crown having not done so. He did not therefore consider that he could conclude on the material before him at the summary judgment/strike out stage that the rule in Henderson v Henderson excluded the Crown’s claim.
[93] The issue for the Court is essentially whether, given the Crown’s knowledge of the SN9 revisions, the Crown should have brought its claim for the increased amounts in the 2001 proceedings. This question reduces to a broad, merits-based assessment of whether the Crown’s actions in seeking to raise an issue in the present litigation constitute an abuse of process because of the possibility that the same matters should have been raised in the 2001 proceedings. We doubt that an abuse of process argument would succeed for similar reasons to those that apply in the case of res judicata and issue estoppel. We say no more because it is not possible to assess the arguments made by the parties at this stage of the proceedings for the following reasons:

(a) As already discussed, the 2001 proceedings were concerned with the appropriate transition methodology under the terms of the contract. The present proceedings concern revision and arise because Contact contests the Crown’s right to issue new invoices based on revisions to the SN9 index. These issues are “conceptually very different” (Bhanabhai at [62]), concerning the interpretation of different contractual provisions.

(b) The Crown had not exercised its right to issue new invoices when the 2001 proceedings commenced, and the debt for which it now claims became liquidated only in July 2002 when these invoices were issued.

(c) The Crown has put forward evidence from Mr McKenzie purporting to explain its decision not to reissue invoices to take account of the revision to the PPI index numbers prior to the 2001 hearing. Even if failure to raise invoices is relevant, there is a conflict of evidence on this point, which cannot fairly be resolved at this stage of the proceedings.

(d) Contact also knew of the revisions to SN9 prior to the 2001 hearing. This may be relevant to the question as to whether Contact can claim that the Crown’s bringing of the present proceedings when it failed to raise the PPI revision and its implications in the 2001 proceedings should now be seen as an abuse of process. Contact’s successful seeking of a revision to the figures determined by Goddard J immediately after her decision (see [48] – [50] above) may also be relevant to this.

[94] Mr Chapman strongly disputed the Associate Judge’s finding that there was a conflict of evidence (see [93](c) above). He said that Mr McKenzie had said the possible anticipated revision of the SI9 index was a reason for not raising the 30 August revision in the 2001 proceedings. But, he submitted, Mr McKenzie had not said when he learned that there would be no revision and the Associate Judge should therefore have disregarded this evidence. We disagree. We see no reason to impugn the evidence that Mr McKenzie did give without that evidence being tested in the normal way. In our view, the Associate Judge’s approach was correct in the circumstances.

Can the Crown reverse its revision of invoices in periods two and three?

[95] The essential issue on this aspect of the appeal is whether the Crown may reverse its revision of invoices in periods two and three, if its claim fails in relation to period one. Contact appears to accept that, if the Crown’s claim fails in relation to the revised invoices for period one, then in all logic the invoices for period two should also be based on the original PPI. But it argues that, in the circumstances of this case, what is good for the goose is not also good for the gander. It says that the Crown cannot reopen the invoices under cl 12.6.2 because it is now out of time to do so. Mr Kos described this as “a Janus-like stance”.
[96] The Associate Judge considered the terms of cl 12.6.2 (see [23] above) and the correspondence between the Crown and Contact at the time the revised invoices were issued. He considered that there was an argument that the undercharging in the revised invoices (if that is subsequently found to be the case) was “found” within two years of the date of the invoice and therefore cl 12.6.2 was properly invoked. He also recorded the Crown’s argument that the Crown’s reservation of its right to amend the invoices was accepted by Contact. The Judge said that the issue of what was necessary for undercharging to be “found” was intensely factual and needed to be thoroughly tested at trial by careful examination of all the evidence. He therefore declined to strike out the cause of action.
[97] Mr Chapman said the Associate Judge ought to have struck out the cause of action because under the contract there was no place for a unilateral reservation of a right to trigger cl 12.6.2 outside the two year period. He said the argument about what the word “found” meant had not been raised by the Crown and should not have been assessed.
[98] We agree with the Associate Judge that it is not appropriate to strike out this cause of action at the present time. The fact is that the cause of action is an alternative, which will come into play only when the result of the dispute about period one is resolved. The resolution of that dispute will involve findings by the Court as to the proper meaning of cl 12.6.2 and what is required under it, and we do not consider it appropriate to strike out the period two and three claims until the period one position has been resolved. We also agree with the Associate Judge that the nature of the exchange between the parties at the time of the payment by the Crown, at which time Contact accepted payment and, at least arguably, agreed to the Crown’s entitlement to reserve its position, will be best determined after cross-examination of those involved.
[99] We therefore uphold this aspect of the Associate Judge’s decision.

Result

[100] We conclude that the Associate Judge was correct to decline the application for summary judgment, and also correct to refuse to strike out any of the Crown’s claims. The appeal is therefore dismissed and the matter should now proceed to trial in the High Court.

Costs

[101] Costs should follow the event. We award costs to the Crown for a standard appeal on a band A basis and usual disbursements.

Solicitors:
T J Whiteley, Contact Energy Limited, Wellington for Appellant
Crown Law Office, Wellington for Respondent

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