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Accident Compensation Cases

McGougan v DePuy International Ltd (HC, 20/12/16)

Judgment Text

JUDGMENT OF COLLINS J 
Collins J
Introduction 
[1]
This judgment answers the following question: 
“Are 25 of the plaintiffs1
| X |Footnote: 1
In this judgment the term ‘plaintiffs’ is used in reference to proceedings commenced in New Zealand and the term ‘claimants’ is used in reference to proceedings commenced in England. 
in this proceeding estopped from suing the defendant (DePuy) in New Zealand for compensatory damages in circumstances where: 
(1)
they commenced proceedings in England seeking compensatory damages against DePuy in relation to conduct that forms the basis of their claim in New Zealand; and 
(2)
a court of competent jurisdiction in England has determined that a sample of the New Zealand claimants were barred by the law of New Zealand from seeking compensatory damages against DePuy? ”
[2]
In the context of this case, the question posed in paragraph [1] raises the following two sub-questions: 
(1)
Were the 25 plaintiffs parties to, or privies of the claimants in, the sample proceedings determined by the court in England? 
(2)
If not, is it nevertheless an abuse of process for the 25 plaintiffs to continue their claim for compensatory damages in New Zealand? 
[3]
This judgment explains why the 25 plaintiffs are estopped from bringing their claim for compensatory damages in New Zealand because they were privies to the sample claimants in the proceedings determined by the High Court of Justice in England. This judgment also explains why, in the alternative, it would be an abuse of process to permit the 25 plaintiffs to continue their claim for compensatory damages in New Zealand. 
[4]
To assist readers this judgment is divided into two parts. Part I sets out the background and explains the issues in further detail. Part II explains the conclusions summarised in [3]. 
Part I Background 
[5]
In an earlier judgment (ACC bar judgment)2
| X |Footnote: 2
McGougan v DePuy International Ltd [2016] NZHC 2511Has Litigation History which is not known to be negative[Blue] 
I answered the following question posed by the plaintiffs:3
| X |Footnote: 3
At [1]. 
 
“May claims for compensatory damages be brought by the plaintiffs in New Zealand for personal injury they have suffered in this country, and for which they have cover under the Accident Compensation Act 2001 … in circumstances where the conduct giving rise to their claims occurred in a foreign jurisdiction? ”
[6]
In concluding the answer to that question was “no”, I reasoned that s 317(1) of the Accident Compensation Act 20014
| X |Footnote: 4
317 Proceedings for personal injury 
(1)
No person may bring proceedings independently of this Act, whether under any rule of law or any enactment, in any court in New Zealand, for damages arising directly or indirectly out of— 
(a)
personal injury covered by this Act; or 
(b)
personal injury covered by the former Acts. 
 
prevented the plaintiffs from bringing their claims for compensatory damages in New Zealand because they had cover under that Act, even though the conduct giving rise to their claims occurred in England. 
[7]
In the ACC bar judgment I set out the background to the proceedings and explained the plaintiffs' claims against DePuy. I will repeat in paragraphs [8] to [14] of this judgment the background parts of the ACC judgment that are common to both judgments. 
The parties 
[8]
DePuy is a company registered in England. It manufactures medical devices, including prosthetic hip implants. Two hip implant systems designed and manufactured by DePuy between July 2003 and August 2010 (DePuy hip implants) feature in this proceeding.5
| X |Footnote: 5
The DePuy ASR Hip Resurfacing System and the DePuy ASR XL Acetabular System. 
 
[9]
The three named plaintiffs in this proceeding represented a larger group of 38 New Zealanders who, between 2006 and 2009 received DePuy hip implants in New Zealand. Twenty-five of the larger group of plaintiffs were claimants in proceedings in England, including the three named plaintiffs. 
The claims 
[10]
DePuy designed and manufactured its hip implant systems primarily in Leeds, England. The hip implants were supplied by DePuy to related companies, including companies in New Zealand, which in turn supplied the DePuy hip implants in this country. 
[11]
After the plaintiffs received their DePuy hip implants serious questions began to emerge concerning the effectiveness and the safety of those implants. DePuy recalled its hip implants in August 2010. The plaintiffs underwent revision surgery in 2011 and 2012 to replace the DePuy hip implants. 
[12]
The statement of claim alleges the DePuy implants were designed and/or manufactured with defects that led to the breakdown of part of the implants which in turn led to the release of cobalt and chromium into patients. This is said to have led to metal poisoning and tissue damage. 
[13]
The plaintiffs plead that DePuy failed to undertake a proper risk assessment and testing of the hip implants before they were distributed. It is also alleged DePuy failed to adequately monitor the implants after they were placed into patients. 
[14]
Two causes of action are pleaded by the plaintiffs. They say DePuy committed the tort of negligence and breached the Consumer Guarantees Act 1993. The relief sought by the plaintiffs includes a prayer for a declaration that DePuy acted negligently and unlawfully in designing, manufacturing, marketing and distributing the DePuy hip implants, compensatory damages and exemplary damages. 
[15]
The effect of the ACC bar judgment is that the plaintiffs' claims for compensatory damages cannot continue unless an appellate court rules otherwise. The plaintiffs have appealed that judgment. It is anticipated that any appeal from this judgment will be heard in conjunction with the appeal from the ACC bar judgment. 
Proceedings in England 
[16]
Seven groups of claimants commenced proceedings in England against DePuy between 2012 and 2014. Sixty-three New Zealanders became claimants in England. All the New Zealand claimants were represented by Mr Preston QC of PLI Legal Services. DePuy was represented by Kennedys LLP and their counsel. 
[17]
One of the seven groups of claimants in England comprised 10 claimants, four of whom were New Zealanders. The others in that group were from South Africa and Australia. The first named claimant in that claim group was Mr Allen, a New Zealander. That group of claimants is known as the Allen claimants”. The New Zealand Allen claimants are described as the New Zealand sample claimants. They each filed full particulars of their respective claims. 
[18]
On 1 November 2013, Master Cook ordered that there should be a preliminary issue trial in respect of the Allen claimants (including the New Zealand sample claimants), primarily to determine whether English law applied to the claims. 
[19]
On 18 March 2014, Stewart J determined that New Zealand law applied to the claims of the New Zealand sample claimants (Allen (No. 1)).6
| X |Footnote: 6
Allen v DePuy International Ltd [2014] EWHC 753, [2015] 2 WLR 442 (QB)
 
[20]
The New Zealand sample claimants then re-pleaded their claims alleging a breach of the New Zealand Consumer Guarantees Act. Thereafter, DePuy filed a re-amended statement of defence pleading that the New Zealand sample claimants' claims for compensatory damages were barred by s 317 of the Accident Compensation Act. 
[21]
The legal representatives for each side then exchanged correspondence in which they reached agreement on a procedure for resolving whether or not s 317 of the Accident Compensation Act barred claimants from seeking compensatory damages in England. The parties agreed that a preliminary issue trial in relation to the meaning and effect of s 317 of the Accident Compensation Act was appropriate. The question then became which cases should be heard in that preliminary issue trial. 
[22]
Mr Preston QC suggested three options. The second of the options he proposed was framed in the following way: 
“ … the second option is that the NZ Claims are consolidated as a group, but with only the four NZ Claimants in Allen and others proceeding to the preliminary issue hearing as sample cases, as those are the cases that have progressed actively to date and findings have already been made as to the applicability of NZ law, with the remaining NZ claims being stayed pending the outcome of that hearing …  
A necessary ingredient in this solution would … be that a costs sharing order is made, ensuring that liability for any adverse costs order made against those four [New Zealand sample] claimants in respect of the [ACC bar] preliminary issue trial will be shared severally by the whole cohort of NZ Claims in the consolidated group. The logic behind that proposal is that once a ruling on the NZ law preliminary issue has been given, that will in practice be dispositive for any other claims that are subject to NZ law. ”
[23]
This proposal was accepted by DePuy. As a consequence, on 2 July 2014 Master Cook made an order that contained in the intitulement a reference to the Allen proceedings and the other claim numbers that covered all of the New Zealand claimants. The order made by Master Cook: 
(1)
referred to claimants listed in Schedule 1 of the order as “the NZ claimants”
(2)
identified the first four New Zealand claimants, from the Allen claimants, as “the New Zealand sample claimants”
(3)
said, “save for the claims of the NZ sample claimants, the claims of the NZ claimants shall be stayed until further order of the Court”; and 
(4)
explained that each New Zealand claimant was severally liable for the “common costs” of “the NZ sample claimants up to and including the final resolution (including any appeal) of the preliminary [ACC bar] issue … ”
[24]
The Schedule to Master Cook's order identified the New Zealand sample claimants as being Mr Allen, Mr Monks, Mr Myson and Mr Fletcher (Mr Fletcher was subsequently removed as a New Zealand sample claimant after it was discovered he had received his hip implant in Australia). Fifty-nine other New Zealand claimants were listed in the Schedule to Master Cook's order. Thus, a total of 63 New Zealand claimants were identified. 
[25]
On 1 April 2015, Simler J concluded that s 317 of the Accident Compensation Act barred the claims for compensatory damages brought in England by the New Zealand sample claimants and that New Zealand claimants as defined in Master Cook's order of 2 July 2014 were to pay DePuy's costs in relation to the preliminary issues trial (Allen (No.2)).7
| X |Footnote: 7
Allen v Depuy International Ltd [2015] EWHC 926 (QB)
 
[26]
Simler J's understanding of the procedure that had been agreed to is set out in her judgment in the following way:8
| X |Footnote: 8
At [8]. 
 
“If the preliminary issue is determined in the defendant's favour it will bring the New Zealand claimants' claims to an end. If it is determined in the claimants' favour then they (and others) will be able to proceed with their claims in the English court, under the [Consumer Guarantees Act], applying New Zealand law. ”
[27]
The orders that were sealed on 9 April 2015 following the delivery of Allen (No. 2) contained in the intitulement a reference to the claim numbers that covered all the New Zealand claimants. In that order it was stated that the claims of each New Zealand claimant would be struck out unless the claimant in question applied “for permission to amend his/her statement of case or alternatively has applied for further directions or discontinued his/her claim by 4pm 29 May 2015 … ”
[28]
Each of the New Zealand claimants discontinued their claims on or about 28 May 2015. 
[29]
The three New Zealand sample claimants accept the doctrine of res judicata prevents them from initiating proceedings in New Zealand and they have therefore not endeavoured to do so. 
[30]
As noted earlier, 25 of the 63 New Zealand claimants in the English proceedings have however joined the proceedings commenced in New Zealand, including Mr McGougan, Mr Dingle and Mr Sanson, who are the named plaintiffs in the application before me. 
[31]
In addition, 16 New Zealanders who were not claimants in England have become plaintiffs in the New Zealand proceedings. The ACC bar judgment applies to all plaintiffs in the New Zealand proceedings. 
[32]
This judgment however, only concerns the 25 New Zealand claimants in England who have become plaintiffs in New Zealand and relates only to their claims for compensatory damages. 
[33]
Despite having succeeded in the ACC bar judgment, DePuy also seeks to have a judgment in its favour in relation to the estoppel and/or abuse of process questions recorded in paragraphs [1] and [2] of this judgment. DePuy wishes to have the questions posed in this judgment resolved in its favour in case the ACC bar judgment is overturned by an appellate court. 
Part II Analysis 
Issue estoppel 
Underlying principles 
[34]
The principles that underpin issue estoppel, cause of action estoppel and abuse of process were explained in the following way by Somers J in New Zealand Social Credit Political League Inc v O'Brien:9
| X |Footnote: 9
New Zealand Social Credit Political League Inc v O'Brien [1984] 1 NZLR 84 (CA)Has partially negative history or cases citing, but has not been reversed or overruled[Yellow]  at 95. 
 
“ … a matter once determined may not be again litigated, … a matter which could and should have been raised in proceedings which have been determined should not be allowed to be raised subsequently, and … a collateral attack upon a final decision in other proceedings will not be permitted. The dual objects are finality of litigation and fair use of curial procedures. ”
[35]
A foreign judgment may lead to a cause of action estoppel, an issue estoppel or a finding of abuse of process in New Zealand where the foreign court has determined the claim or an issue in the proceeding in circumstances that bind a party in New Zealand.10
| X |Footnote: 10
Carl-Zeiss-Stiftung v Rayner & Keeler (No. 2) [1967] 1 AC 853 (HL)Has Cases Citing which are not known to be negative[Green]  and Owens Bank Ltd v Etoile Commercials SA [1995] 1 WLR 44 (PC)Has Cases Citing which are not known to be negative[Green] 
 
[36]
In Arnold v National Westminster Bank plc, Lord Keith explained issue estoppel in the following way:11
| X |Footnote: 11
Arnold v National Westminster Bank plc [1991] 2 AC 93 (HL)Has Cases Citing which are not known to be negative[Green]  at 105. 
 
“Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue. ”
Although Lord Keith did not refer to privies when proffering his definition of “issue estoppel”,12
| X |Footnote: 12
Lord Keith referred to both parties and privies when defining cause of action estoppel in Arnold v Westminster Bank plc, above n 11, at 104. 
there is no logical basis upon which issue estoppel could not be engaged where both sets of proceedings involve the same parties or their privies.13
| X |Footnote: 13
See also Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 per Lord Sumption at [17]. 
 
[37]
The parties agree that this case only concerns issue estoppel and abuse of process. Issue estoppel is engaged because Simler J determined an issue in the proceedings in favour of DePuy, namely that s 317 of the Accident Compensation Act barred claims for compensatory damages where the claimant has cover under the Accident Compensation Act. Simler J did not formally determine a cause of action and the pleadings before her did not include the cause of action in negligence now pleaded by the plaintiffs in New Zealand. 
Requirements of issue estoppel 
[38]
In order for DePuy to succeed in its claim that the 25 New Zealand plaintiffs are prevented by issue estoppel from bringing their proceedings in New Zealand, the following four requirements must be established.14
| X |Footnote: 14
Carl-Zeiss-Stiftung v Rayner & Keeler Ltd, above n 10 at 935 and Americhip, Inc v Dean [2015] NZHC 700, [2015] 3 NZLR 498Has Litigation History which is not known to be negative[Blue]  at [32]. 
 
[39]
First, that there was jurisdiction for Simler J to hear and determine Allen (No. 2). This requirement is satisfied. The claimants in the proceedings in England voluntarily submitted to the jurisdiction of the courts of England by commencing their proceedings in that jurisdiction. Mr Goddard QC, senior counsel for the plaintiffs, accepted the High Court of Justice had jurisdiction when it decided Allen (No. 2)
[40]
Second, that Simler J's judgment decided the same issue that is in contention in the New Zealand proceedings, and that it was necessary for her to decide that issue. 
[41]
This requirement of issue estoppel is also established. The issue before Simler J in Allen (No. 2) and the issue before me in the ACC bar judgment was whether the plaintiffs' claims for compensatory damages were barred by s 317 of the Accident Compensation Act. 
[42]
In addition, it was necessary for Simler J to decide whether s 317 of the Accident Compensation Act barred the plaintiffs' claims for compensatory damages so as to determine whether or not the claimants could continue with their claim for compensatory damages in England. 
[43]
Third, the decision in Allen (No. 2) had to be final, conclusive and on the merits. Mr Goddard accepts this requirement has also been established. The New Zealand sample claimants in Allen (No. 2) did not seek permission to appeal and the judgment of Simler J was conclusive of the claims for compensatory damages by the claimants in the English proceedings. The issue in Allen (No. 2) was determined on the merits after full argument and with the benefit of expert evidence relating to New Zealand law from Mr Goddard and Mr McLachlan QC. 
[44]
Fourth, DePuy must establish that the litigation in England was between the same parties or their privies as in the New Zealand proceedings. This criterion is in issue. The 25 New Zealand plaintiffs say they were neither parties nor privies to the parties in the Allen (No. 2) proceeding and as such they maintain they are not bound by Simler J's judgment. 
[45]
Finally, the 25 New Zealand plaintiffs rely on a “special circumstances exception” they say arises in this case because it would be unjust to rigidly apply the principles of issue estoppel in their circumstances. 
Parties/privies 
Parties 
[46]
In Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2),15
| X |Footnote: 15
Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2), above n 10 at 882. 
the House of Lords explained that it is difficult to define with precision the terms “parties” and “privies” in a concise and exhaustive manner because there are so many permutations associated with both concepts. In Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No. 2) Lord Guest identified four elements to being a party, namely: 
(1)
an appearance in the proceeding; 
(2)
being represented in the proceeding; 
(3)
whether there was an order for costs that could be made against the person or entity in question; and 
(4)
whether they had an interest in the subject matter of the proceeding. 
[47]
In the present case, Mr McLachlan submitted that the issue as to who is a party should be approached from the stand point of substance rather than form. He refers to the following four factors in support of DePuy's argument that the 25 New Zealand plaintiffs were parties in Allen (No. 2)
[48]
First, the order of 2 July 2014 made by Master Cook was in respect of all actions brought by all the New Zealand claimants. He says those claimants were accordingly “parties to the order and bound to comply with the order in so far as it specified the procedure for the preliminary issues trial”.16
| X |Footnote: 16
Submissions for First Defendant, 19 September 2015 at [30](a). 
 
[49]
Second, all the New Zealand claimants were seeking a determination of the fundamental question concerning the meaning and effect of the bar in s 317 of the Accident Compensation Act and whether it prevented all the New Zealand claimants from continuing their claims for compensatory damages. 
[50]
Third, the orders that were sealed following Allen (No. 2) were intituled with all the claim numbers that covered all of the claims brought by all New Zealand claimants. 
[51]
Fourth, estoppels must be mutual. The expert evidence of Mr Palmer QC, an English barrister who gave evidence for DePuy on the law of issue estoppel in England, was that if the judgment in Allen (No. 2) had been adverse to DePuy, no English Court would have permitted DePuy to relitigate the ACC bar question on behalf of the remaining New Zealand claimants. 
[52]
There are three reasons why I have concluded that in the circumstances of this case the 25 New Zealand plaintiffs were not parties to Allen (No. 2)
[53]
First, the New Zealand claimants in the English proceedings filed their own separate proceedings and were not a party on the record of the Allen proceeding. 
[54]
Second, the New Zealand claimants' proceedings were stayed at the time Allen (No. 2) was heard and determined. They were therefore not directly engaged in the Allen (No. 2) hearing. 
[55]
Third, although they had the same counsel as the New Zealand sample claimants, the New Zealand claimants were not represented in the Allen (No. 2) hearing. 
Privies 
[56]
There is a high degree of overlap between the New Zealand and English cases that have analysed whether or not a plaintiff who was not a party in earlier litigation is nevertheless estopped from pursuing later proceedings by reason of being a privy of one of the parties in the earlier proceeding. 
[57]
In Gleeson v J Wippell & Co Ltd, Sir Robert Megarry V-C explained that:17
| X |Footnote: 17
Gleeson v J Wippell & Co Ltd [1977] 3 All ER 54 (Ch)Has Cases Citing which are not known to be negative[Green]  at 515. 
 
“ … the doctrine of privity for these purposes is somewhat narrow, and has to be considered in relation to the fundamental principle nemo debet bis vexari pro eadem causa.18
| X |Footnote: 18
No one should be vexed twice in respect of the same matter. 
 ”
[58]
The principles that guide whether or not a person is a privy to a party in earlier proceedings have been summarised recently by the Court of Appeal for England and Wales in the following way:19
| X |Footnote: 19
Resolution Chemicals Ltd v H Lundbeck A/S [2013] EWCA Civ 924 at [32]. 
 
“ … a court which has the task of assessing whether there is privity of interest between a new party and a party to previous proceedings needs to examine (a) the extent to which the new party had an interest in the subject matter of the previous action; (b) the extent to which the new party can be said to be, in reality, the party to the original proceedings by reason of his relationship with that party; and (c) against this background to ask whether it is just that the new party should be bound by the outcome of the previous litigation. ”
[59]
These concepts can also be found in Shiels v Blakely,20
| X |Footnote: 20
Shiels v Blakely [1986] 2 NZLR 262 (CA)Has partially negative history or cases citing, but has not been reversed or overruled[Yellow]  at 268. 
where the Court of Appeal said that privity in the circumstances of the present case requires: 
… such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped. 
[60]
I have found it helpful to follow the three steps set out by the Court of Appeal of England and Wales in Resolution Chemicals Ltd v H Lundbeck A/S referred to in paragraph [58] of this judgment. In doing so I have reached the following conclusions. 
[61]
All the New Zealand claimants, including the 25 plaintiffs had a clear and obvious interest in the subject matter of Allen (No. 2). The ability of the New Zealand claimants to continue with their claim for compensatory damages in the proceeding they had initiated in England was going to be determined by the outcome of Allen (No. 2). The issues in Allen (No. 2) directly affected the New Zealand claimants, who were not parties to that proceeding. 
[62]
The parties in Allen (No. 2) were acting not only on their own behalf but, in reality, on behalf of all New Zealand claimants. Any minor differences in the circumstances of the New Zealand claimants were irrelevant to the preliminary issue, namely whether s 317 of the Accident Compensation Act barred the claim for compensatory damages brought by the parties in Allen (No. 2) from proceeding and thus other New Zealand claimants. The procedure that the parties agreed upon was designed to achieve a cost-effective resolution of the preliminary issue, founded on a common interest. One element of the cost-effective procedure agreed upon included all the New Zealand claimants being severally liable for the costs in Allen (No. 2)
[63]
Mr Goddard submitted that the failure to adopt the Group Litigation Order (GLO) procedure under r 19 of the Criminal Procedure Rules (UK) is indicative of the New Zealand claimants not being privies. However, the failure to put in place a formal GLO is not determinative in the circumstances of this case where the parties agreed upon a clear procedure to determine the preliminary issue in a way that was binding on all claimants. 
[64]
Crucially, the justice of this case demands that the New Zealand claimants be bound by Allen (No. 2). The reasons for this stem from the fact that the procedure agreed upon for Allen (No. 2) was suggested by counsel for all New Zealand claimants and in circumstances where their counsel explained “the logic behind [his] proposal [was] that once a ruling on the NZ law preliminary issue [had] been given, that [would] in practice be dispositive for any other claims that [were] subject to NZ law”
[65]
Mr Goddard endeavoured to suggest a distinction could be drawn between the practical disposition of the New Zealand claims and the legal disposition of those claims. If there is such a distinction then it is very elusive. Had all the New Zealand claimants been asked prior to Simler J's judgment if they understood that any judgment in Allen (No. 2) would bind them then they would undoubtedly have answered that question “yes”. At the time the procedure for resolving the preliminary issues trial was agreed upon, no distinction was contemplated between the “practical” and “legal” disposition of all the New Zealand claims. 
[66]
In addition, it is a well-established principle that a person cannot avoid the consequences of litigation from which they have “stood aside” in circumstances where they have agreed to the litigation continuing as a means of resolving his or her separate proceeding.21
| X |Footnote: 21
Shiels v Blakely, above n 20; Wytcherley v Andrews (1871) LR 2 P&D 327 (HL); Re Lart [1896] 2 Ch 788 (Ch) and House of Spring Gardens Ltd v Waite [1991] 1 QB 241 (CA)Has Cases Citing which are not known to be negative[Green] 
This principle was confirmed by the Court of Appeal of England and Wales in Resolution Chemicals,22
| X |Footnote: 22
Resolution Chemicals Ltd v H Lundbeck A/S, above n 19, at [26]. 
where it was said that privity exists “where C knows of proceedings between A and B in which his rights are being tested but stands back and does nothing”
[67]
In the present case, the 25 plaintiffs were claimants in the English proceeding. They agreed to a cost-effective procedure to determine an issue in Allen (No. 2) that was common to all the New Zealand claimants. Their agreement to that procedure included an agreement to be severally liable for costs in Allen (No. 2). Having agreed to that procedure and having “stood aside” while the New Zealand sample claimants shouldered the burdens of arguing Allen (No. 2), the 25 plaintiffs cannot now escape the consequences of Simler J's judgment. 
[68]
For these reasons I am satisfied the 25 New Zealand plaintiffs were privies of the New Zealand sample claimants in Allen (No. 2)
Special circumstances exception 
[69]
In addition to challenging the existence of the parties and/or privies requirement for issue estoppel, Mr Goddard submitted that the present case falls within the “special circumstances exception” to the application of issue estoppel. Two elements to the special circumstances exception were advanced by Mr Goddard. 
Materially altered circumstance 
[70]
The first aspect of this part of Mr Goddard's case relies on the proposition that an injustice would arise because of a materially altered circumstance between Allen (No. 2) and the New Zealand proceedings. The origins of this special circumstance exception can be traced to Arnold v National Westminster Bank plc.23
| X |Footnote: 23
Arnold v National Westminster Bank plc, above n 11. 
The exception has since been explained further by Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd.24
| X |Footnote: 24
Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd, above n 13. 
 
[71]
In Arnold, the special circumstances exception to issue estoppel arose because in earlier litigation Walton J had interpreted a rent review clause in a lease in a way that was adverse to the tenants. Walton J declined the tenants' application for leave to appeal. In subsequent cases involving different parties the Court of Appeal for England and Wales cast doubt over Walton J's interpretation of the clause in question. In a subsequent rent review between the same parties that appeared before Walton J, the tenants endeavoured to challenge the construction of the rent review clause previously favoured by Walton J. Ultimately, the House of Lords decided that the second proceeding raised a question of issue estoppel but that the rejection of Walton J's interpretation of the rent review clause by the Court of Appeal in subsequent cases constituted a materially altered circumstance that warranted allowing the parties to re-litigate the very point that Walton J had rejected. The House of Lords held that a special circumstance exception to the principle of issue estoppel needed to be invoked in Arnold in order to avoid what would otherwise be an injustice. 

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