Supreme Court of WA|2006-09-29|Before: Mr J, Arthur J

Lee v St George Bank Ltd [2006] WASC 221 (29 September 2006)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : LEE -v- ST GEORGE BANK LTD [2006] WASC 221

Practice and procedure - Application for permanent stay of action - Abuse of process - Whether plaintiff's claim inconsistent with basis of earlier claim - Whether attempt to relitigate issues in earlier action - Relevant principles - Turns on own facts

Australian Securities and Investments Commission Act 1989 (Cth), s 12CA, s 12CB, s 12DA, s 12G, s 12GH

Arms v Houghton [2006] FCAFC 46

Arthur J S Hall & Co (A Firm) v Simons [2002] 1 AC 615

Astvilla Pty Ltd v Director of Consumer Affairs [2006] VSC 289

Batistatos v Roads & Traffic Authority of New South Wales [2006] HCA 27; (2006) 80 ALJR 1100

Branwhite v Worcester Works Finance Ltd [1968] 3 All ER 104

Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334

Coffey v Secretary, Department of Social Security [1999] FCA 375; (1999) 86 FCR 434

Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713

Davey v Ron Farris Real Estate Pty Ltd [2000] WASCA 58

Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121

Houghton v Arms [2006] HCATrans 411

Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529

IGA Distribution Pty Limited v Gow [2006] HCA 41

Lee v Mavaddat [2005] WASC 68

Lee v Mavaddat [2005] WASC 68 (S)

Mercantile Credit Co Ltd v Hamblin [1964] 3 All ER 592

Re Griffiths; Ex parte Homestyle Pty Ltd [2005] WASCA 103

Reichel v Magrath (1889) 14 App Cas 665

Rippon v Chilcotin Pty Ltd [2001] NSWCA 142

Rogers v The Queen (1994) 181 CLR 251

Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699

State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423

Trade Practices Commission v Kimberley Homes Pty Ltd (1989) 217 ALR 110

VACC Insurance Co Ltd v BP Australia Ltd [1999] NSWCA 427

West v Jackson McDonald [2001] WASC 198

Wong v Citibank Ltd [2004] NSWCA 396

Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447

Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd [1975] HCA 23; (1975) 132 CLR 323

Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (Receivers and Managers Appointed) (In Liq) [1993] FCA 342; (1993) 43 FCR 510

Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100

Johnson v Gore Wood & Co [2000] UKHL 65; [2001] 2 WLR 72

Mahony v J Kruschich (Demolitions) Pty Ltd [1985] HCA 37; (1985) 156 CLR 522

Taylor v Harcourts Real Estate Ltd [1990] ANZ ConvR 579

Vadasz v Pioneer Concrete (SA) Pty Ltd [1995] HCA 14; (1995) 184 CLR 102

1 MASTER NEWNES: This is an application by the defendant (the "Bank") for a permanent stay of the plaintiff's claim and for judgment on its counterclaim. The application arises in somewhat unusual circumstances.

2 It was common ground that, on or about 1 January 2000, the plaintiff signed, among other things, a loan agreement for a loan of $1,625,000 from the Bank and a mortgage to the Bank over the plaintiff's home to secure the loan. On or about 2 February 2001, the plaintiff executed a second loan agreement for the sum of $1,745,000, also secured by a mortgage over her home. The evident purpose of the second loan was to provide funds to discharge the first loan, and that was done on or about 8 February 2001.

3 The plaintiff subsequently defaulted under the second loan and, by a default notice dated 28 January 2004, the Bank demanded payment of the then outstanding sum of $2,017,745.02. That sum remains unpaid.

4 On 31 May 2002, however, the plaintiff commenced this action against the Bank, claiming a declaration that the loan agreement and the mortgage were void or unenforceable against her, an order that the Bank execute a registered discharge of the mortgage, and damages. By counterclaim, the Bank sought payment of the sum owing to the Bank and an order that the plaintiff deliver up vacant possession of her home.

5 In the meantime, one Michael Mavaddat ("Mavaddat") had sued the plaintiff in relation to an agreement between them connected with the loan transaction. The plaintiff, in turn, had brought proceedings against Mavaddat alleging, among other things, that Mavaddat had acted as her agent in dealings with the Bank in respect of the loan and that she had entered into the loan agreement and the mortgage as a result of misleading and deceptive conduct on the part of Mavaddat or, alternatively, a breach by Mavaddat of fiduciary duties he owed to her, and also by reason of his undue influence, unconscionable conduct and breach of contract.

6 The plaintiff's action against Mavaddat (the "Mavaddat action") proceeded to trial in late 2004 and January 2005 before Roberts-Smith J (as his Honour then was) and judgment was given on 29 April 2005: Lee v Mavaddat [2005] WASC 68. Final orders were made in the action on 22 June 2005.

7 In the result, Mavaddat was ordered, among other things, to pay to the plaintiff the sum of $2,246,467.98 (being the amount then owing to the Bank) and interest at the rate of 7.32 per cent per annum, compounded daily or any higher rate that the Bank may charge to the plaintiff. I understand that little, if anything, of that judgment sum has actually been recovered by the plaintiff.

8 It seems that little substantive progress was made in this action while the plaintiff pursued the Mavaddat action. The Bank, by counterclaim, now presses for judgment in this action against the plaintiff for the amount outstanding under the loan agreement and secured by the mortgage. The plaintiff, in turn, seeks to pursue claims against the Bank for declarations that the loan agreement and mortgage are void or unenforceable against her, an order that the Bank execute a registered discharge of the mortgage, and damages.

9 The Bank contends that, the plaintiff having pursued the Mavaddat action on the basis that she had an existing liability to the Bank, and having obtained judgment on that basis, it would be unconscionable and an abuse of process for the plaintiff now to pursue this action to establish that in fact she has no such liability to the Bank. Alternatively, the present action is an abuse of process in that the plaintiff seeks to relitigate the question of for whom Mavaddat acted in connection with the execution by the plaintiff of the loan agreement and the mortgage, it having already been found in the Mavaddat action that he acted for the plaintiff.

10 It is, I think, necessary to go first in some detail to the issues in the Mavaddat action.

11 In the statement of claim, the plaintiff pleaded, among other things, that she is a Korean citizen with a poor understanding of written and spoken English and limited experience in business matters.

12 The plaintiff pleaded that, in May 1999, she entered into an agreement with Mavaddat for the acquisition, development and sale for profit of a property in Subiaco. Pursuant to the agreement they were to incorporate a company as the vehicle for the project, jointly borrow $1,650,000 from a bank for a term of 12 months to fund the purchase price and all redevelopment costs, and mortgage their respective homes to secure the loan. It was pleaded that the agreement constituted a partnership between them and, further, that a relationship of trust and confidence arose between them in relation to their involvement in the project, both giving rise to fiduciary duties owed by Mavaddat to the plaintiff. Subsequently, pursuant to the agreement, Mavaddat caused a company, Ark Securities Pty Ltd ("Ark Securities") to be incorporated.

13 It was alleged that, in late 1999 and early 2000, Mavaddat had dealings with the Bank purportedly to obtain a loan for himself and the plaintiff. The plaintiff alleged that, in his dealings with the Bank, Mavaddat acted as agent for himself and the plaintiff and owed certain fiduciary duties to the plaintiff.

14 It was pleaded that, by a loan offer dated 4 January 2000 or thereabouts, the Bank offered to lend the plaintiff the sum of $1,625,000 for a period of 12 months, to be secured by a mortgage over her home in South Perth. On or about 4 January 2000, Mavaddat showed to the plaintiff the pages of the loan offer requiring her signature and told her that she must sign it, failing which the Bank would not be prepared to make the loan. He told her there was not sufficient time for her to take advice on it. He did not tell her that the loan was made to her, but not to him, and that the Bank did not require any security from him for the loan. He witnessed the plaintiff's signature on the offer.

15 The plaintiff pleaded that by previously agreeing with her to provide his home in Applecross as joint security, dealing with the Bank and procuring the plaintiff's signature on the offer in the circumstances pleaded, Mavaddat impliedly represented that the Bank's offer had been made to him as well as to the plaintiff, and that the Bank also required him to mortgage his home to secure the loan (the representation is defined in the statement of claim as "the Loan Offer Representation").

16 It is pleaded that, in reliance on the Loan Offer Representation, the plaintiff obtained the loan from the Bank and executed the mortgage over her home to secure it. The sum of $1,625,000 was then credited by the Bank to the bank account of Ark Securities.

17 Ark Securities did not repay the loan on the due date, 4 January 2001, and the plaintiff took out a further loan from the Bank on 29 January 2001 for the sum of $1,745,000, being the amount then owing under the first loan, and paid out the first loan. Default subsequently occurred under the second loan.

18 The plaintiff alleged that the Loan Offer Representation was false, in that the Bank did not require Mavaddat to be a party to the first loan and did not require any security from him. The plaintiff pleaded that Mavaddat's conduct in making the Loan Offer Representation constituted misleading or deceptive conduct in breach of s 79 of the Fair Trading Act 1987 (WA). It is pleaded that, had it not been for the Loan Offer Representation, the plaintiff would not have entered into the first loan agreement or the second loan agreement, nor would she have granted the mortgage to the Bank. As Ark Securities was in liquidation, the plaintiff was liable to make full payment of the principal and interest owing under the loan.

19 It was also pleaded, in the alternative, that by causing the plaintiff to take out the loan and grant the mortgage, Mavaddat obtained a benefit for himself by arranging for funds to be advanced to Ark Securities at no cost or liability to him, and thereby breached his fiduciary duties to the plaintiff. It is further pleaded that by negotiating solely with the Bank, not arranging for the plaintiff to obtain any independent advice and making the Loan Offer Representation, and having regard to the disadvantageous nature of the loan to the plaintiff, Mavaddat exercised undue influence in causing the plaintiff to execute the loan agreements and the mortgage.

20 It was further alleged that Mavaddat was aware the plaintiff was in a position of special disability in relation to her involvement in the project in that he knew she had a poor understanding of spoken and written English and limited experience in business matters, that she relied upon him in relation to the steps to be taken in the project and that she did not take independent advice. It was alleged that Mavaddat's conduct in procuring the execution by the plaintiff of the loan and the mortgage in the circumstances pleaded was unconscionable conduct on his part.

21 It was also alleged that Mavaddat was in breach of the partnership agreement with the plaintiff by failing to cause the loan to conform to the terms of that agreement.

22 It was pleaded in par 26.3 of the statement of claim that "the plaintiff has incurred or will incur a liability to the Bank under the Second Bank Loan of approximately $1,500,000 after recourse to [Ark Securities], which liability would have been half of that amount but for the Contract Breaches."

23 By his defence, Mavaddat denied acting as the plaintiff's agent in dealings with the Bank or owing fiduciary duties to her in connection with any dealings with the Bank. He also denied the Loan Offer Representation and denied that the plaintiff took out the loan and entered into the mortgage on the basis of the Loan Offer Representation. Mavaddat pleaded that no conduct on his part caused the plaintiff to take out the loan or to enter into the mortgage.

24 Mavaddat did, however, admit that the plaintiff had incurred or would incur a liability to the Bank under the second loan. The liability of the plaintiff to the Bank was thus not put in issue in the action.

25 In his reasons for judgment of 29 April 2005, Roberts-Smith J said (at [457]):

"It is clear that at no time did the plaintiff speak to any bank officer about the loan for the acquisition and development of the Subiaco property ('the loan'). The defendant assumed the conduct of all dealings with the banks. He deliberately excluded her, telling her there was no need for her to go to the bank. He told bank officers he was handling her affairs. He caused all bank correspondence to be sent to his own address. It is beyond question that in his dealings with the banks, the defendant acted as agent for himself and the plaintiff and that he owed fiduciary duties to her in that regard."

26 His Honour found that the Loan Offer Representation had been made by Mavaddat and that it was false. His Honour concluded that the Loan Offer Representation constituted misleading or deceptive conduct by Mavaddat and was in breach of s 79 of the Fair Trading Act.

27 Roberts-Smith J also found that, absent the Loan Offer Representation, the plaintiff would not have accepted the loan offer or granted the mortgage. Nor would she subsequently have obtained the second loan from the Bank. She would not have entered into the transaction at all. His Honour found that Mavaddat deliberately concealed the situation from her. He did not explain the true effect of the loan documents and denied her the opportunity to read them or to obtain independent advice in respect of them.

28 Roberts-Smith J also concluded that there was a breach of fiduciary duty by Mavaddat in relation to the loan and that the plaintiff's pleas of undue influence, unconscionable conduct and breach of contract were made out.

29 His Honour accepted the plaintiff's submission that her loss and the measure of her damages under the Fair Trading Act and in equity was "the full amount of her current indebtedness to St George Bank" (at [484]).

30 As I have mentioned, the form of orders appropriate to give effect to his Honour's findings was the subject of a further hearing on 22 June 2005, at which final orders were made. Roberts-Smith J published his reasons for decision in relation to those orders on 27 July 2005: Lee v Mavaddat [2005] WASC 68 (S).

31 In the event, judgment was given for the plaintiff in the sum of $2,246,467.98 plus interest at the rate of 7.32 per cent or any such higher rate that the Bank might charge to the plaintiff. The judgment provided that if the plaintiff recovered any sum from the liquidator of Ark Securities the plaintiff was not to enforce the judgment to the extent of that recovery. It also provided that if the plaintiff recovered any further sum from the liquidator of Ark Securities when the plaintiff had already recovered the full extent of the judgment sum, interest and costs, then such amount was to be held by the plaintiff on trust for the defendant and delivered to him.

32 It was not in issue that the amount of the judgment sum was calculated on the basis of the amount owing to the Bank under the loan agreement and secured by the mortgage. It was in that context that the provision for the payment of interest was amended in the course of the hearing on 22 June 2005, to allow for the circumstance that the Bank may charge a higher rate of interest at some future time.

33 In this action the plaintiff pleads, so far as relevant, the partnership agreement is in essentially the same terms as in the Mavaddat action, save that it is here pleaded that the agreement was that the funds of $1,625,000 for the purchase, renovation and refurbishing of the Subiaco property were to be borrowed by Ark Securities. It is alleged that Mavaddat conducted all discussions with the Bank in relation to the loan and the plaintiff took no part in them. The plaintiff pleads that the Bank provided Mavaddat with the loan documents, mortgage and associated documents and "instructed and/or authorised Mavaddat to procure the execution by the plaintiff of the security documents".

34 The plaintiff pleads that on or about 10 January 2000 Mavaddat "in accordance with the said instruction and/or authority of the Bank" attended on the plaintiff at her home and procured the execution by the plaintiff of the security documents. It is alleged that he told the plaintiff the loan agreement was a bank document and she should sign the document, but otherwise did not explain its contents. He showed her only one page of the loan agreement, being the page upon which her signature was to be affixed, and told her that she should sign that page. The plaintiff was not given an opportunity to, and did not, read the loan agreement or other security documents. Nor did Mavaddat provide her with the opportunity to have the documents translated into her native language, although he knew that she had a limited ability to read the English language.

35 It is pleaded that the plaintiff asked Mavaddat if she could speak to her accountant about the security documents, to which Mavaddat responded there was no time to waste, the Bank needed the documents back quickly otherwise it might not loan the money required for the Subiaco property.

36 It is pleaded that at no time did Mavaddat inform the plaintiff that, in accordance with the negotiations he had finalised with the Bank, Ark Securities would not be the borrower of the loan, but rather that the plaintiff would be the sole borrower and Mavaddat would not be personally liable to the Bank as guarantor or otherwise for the loan and his property would not be mortgaged to secure the loan. The sole mortgage security would be a mortgage over the plaintiff's home.

37 It is pleaded in par 12 of the statement of claim that, by reason of his agreement with the plaintiff and the events surrounding her execution of the documents, Mavaddat led the plaintiff to believe, which she did, that Ark would be the borrower from the Bank, that she and Mavaddat would provide joint and several guarantees, and she would mortgage her home and Mavaddat would mortgage his home in favour of the Bank to secure the loan. Those matters are defined as the "representations".

38 It is pleaded that, in reliance on the representations, the plaintiff executed the loan agreement, the mortgage and other associated documents. Had the plaintiff known the true nature and effect of those documents, she would not have executed them and would not have incurred any liability to the Bank.

39 It is alleged in par 16 of the statement of claim that by reason of the provision by the Bank to Mavaddat of the security documents, its instruction and/or authorisation to him to procure the execution of the documents by the plaintiff, and/or the provisions of s 12GH of the Australian Securities and Investments Commission Act 1989 (Cth) ("ASIC Act"), Mavaddat was "the agent and representative of the Bank for procuring the execution by the plaintiff of the Loan Agreement and the Mortgage".

40 It is alleged that the conduct of the Bank by its agent Mavaddat in procuring her execution of the documents in the manner alleged, and in circumstances where they did not accord with the partnership agreement, was misleading and deceptive, contrary to s 12DA of the ASIC Act.

41 The plaintiff also pleads that as she executed the loan agreement and mortgage in circumstances where she did not know their true nature and effect, did not intend to be the sole borrower or provide her home as sole security, had no opportunity to obtain independent advice or have the documents translated into her native language, and relied on the representations, and as she was a person of special disadvantage by reason of her personal circumstances and the circumstances in which her execution of the documents had been procured, the conduct of the Bank by its agent Mavaddat was unconscionable at common law and under s 12CA and s 12CB of the ASIC Act.

42 It is further pleaded that the Bank owed to the plaintiff a duty of care to ensure that, before she executed the loan agreement and the mortgage, the plaintiff was independently advised, had the documents translated into her native language, and understood the effect of the loan agreement and the mortgage, and that the Bank met with the plaintiff and satisfied itself that she understood the legal effect of the documents and the extent of her prospective liability. It is alleged that the Bank failed to do any of those things.

43 The plaintiff pleads that by reason of the alleged unconscionable conduct the Bank is not entitled to enforce the loan agreement or mortgage and that they are void at common law or under the ASIC Act. It is further pleaded that, by reason of its misleading and deceptive conduct, the Bank is not entitled to enforce the loan agreement or mortgage and they are void as against the plaintiff. It is also alleged that by reason of the Bank's breach of the provisions of s 12DA of the ASIC Act and/or the duty of care it owed to the plaintiff, the plaintiff has suffered loss and damage.

44 The plaintiff seeks a declaration that the loan agreement and security documents are void, and/or void ab initio, an order that the Bank discharge the mortgage and deliver up the duplicate certificate of title, and damages at common law or under the ASIC Act.

45 It was submitted by Senior Counsel for the Bank that there were relevantly three significant aspects of the plaintiff's claims in the Mavaddat action. First, the plaintiff's claim was for damages to compensate her for the amount of her liability to the Bank under the loan documents. The plaintiff claimed by way of damages the amount required to make full payment to the Bank. Judgment was obtained for an amount equal to the amount then due to the Bank and was assessed as "the full amount of her current indebtedness to St George Bank", and allowance was also made for the possibilities that Ark Securities may make a payment to the Bank and that the Bank may charge a higher interest rate on the outstanding money. Accordingly, it was a fundamental basis of the plaintiff's claim against Mavaddat that the full amount claimed by the Bank was due and payable to the Bank by the plaintiff and on that basis she obtained judgment for that amount.

46 Secondly, the plaintiff claimed that Mavaddat made representations to her concerning the loan documents that were misleading or deceptive, or made in breach of fiduciary duties owed to her because they were partners. The trial Judge found that in his dealings with the Bank, Mavaddat acted as agent for himself and the plaintiff. The claim against Mavaddat succeeded on the basis that he was acting on behalf of the plaintiff in those dealings.

47 Thirdly, Mavaddat could not be principally liable for misleading and deceptive conduct if his conduct was engaged in on behalf of the Bank. Counsel referred to Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 at 129 - 130. It was, therefore, a necessary corollary of the plaintiff's claim in the Mavaddat action that Mavaddat was liable as principal for the statements he made to the plaintiff concerning the loan documents; he was not acting on behalf of anyone else and, in particular, was not acting on behalf of the Bank. As it had been found that Mavaddat was liable as a principal, it could not now be asserted that the Bank was liable as principal.

48 It was submitted on behalf of the Bank, first, that the plaintiff cannot approbate and reprobate by asserting against Mavaddat that he is liable to pay damages on the basis of the amount of the plaintiff's liability to the Bank, and obtaining judgment on that basis, and then asserting against the Bank that the plaintiff has no such liability.

49 Secondly, it was submitted that the plaintiff's claim was an abuse of process. The jurisdiction of the Court to stay proceedings in order to prevent its procedures being abused extends to cases where the use of the Court's procedures would bring the administration of justice into disrepute, in the sense of converting them into instruments of injustice or unfairness or the scandal of conflicting decisions or by seeking to relitigate an issue that has already been disposed of by earlier proceedings.

50 In this case, there was an abuse of process because the plaintiff sought to litigate factual issues that would have to be decided inconsistently with the same issues in the Mavaddat action if the plaintiff is to succeed. The first was the question of whether the plaintiff had any liability to the Bank. The second was the issue as to for whom Mavaddat was acting when he made representations to the plaintiff concerning the loan documents in order to obtain her signature on them. It was an essential finding in the Mavaddat action that Mavaddat was acting as the plaintiff's partner in his dealings with the Bank, and in describing the loan documents to her and procuring her execution of them. It could only be on that basis that Mavaddat was liable for breach of fiduciary duty in respect of the dealings.

51 It was no answer for the plaintiff to say that there is no necessary inconsistency in Mavaddat having acted as the plaintiff's partner (as found in the Mavaddat action) and as agent of the Bank (in this action); it was clear from the way the case was pleaded in the Mavaddat action that there was no assertion of some dual capacity but rather that Mavaddat was simply acting for himself and the plaintiff. The allegation in the Mavaddat action that Mavaddat acted for himself and the plaintiff "covered the field" in circumstances where there was no suggestion that he acted in any way on behalf of the Bank. Counsel referred to Rippon v Chilcotin Pty Ltd [2001] NSWCA 142, West v Jackson McDonald [2001] WASC 198 and Davey v Ron Farris Real Estate Pty Ltd [2000] WASCA 58.

52 It would be an abuse of process if the plaintiff was allowed to give one version of events to support her claims against Mavaddat and then pursue a claim against the Bank on a contrary evidentiary basis.

53 It was submitted by Senior Counsel for the plaintiff that the plaintiff has separate and independent causes of action against the Bank that are different from those asserted against Mavaddat. This action was on foot well before the trial of the Mavaddat action and the actions could have been heard together. In that event, the Bank could not have complained about the plaintiff's inconsistent position. The Court would have tailored the relief as appropriate to its findings. The position is no different because the actions are being heard separately.

54 Senior Counsel for the plaintiff rejected the contention that the plaintiff was approbating and reprobating. A person may act for more than one party in a transaction and may have a number of ad hoc agencies in respect of that transaction. The plea that Mavaddat was the agent of the Bank in procuring the plaintiff's signature on the security documents was not inconsistent with the finding in the Mavaddat action that in his negotiations with the Bank Mavaddat was the agent of the plaintiff. They are distinct capacities that can co-exist. It was submitted that it was never in issue in the Mavaddat action that Mavaddat was an agent of the Bank in procuring the plaintiff's execution of the documents and no finding was made as to that.

55 The case of unconscionable conduct, it was submitted, does not depend on Mavaddat being the plaintiff's agent. It is clear from the judgment of Roberts-Smith J in the Mavaddat action that the Bank had before it documents which disclosed the plaintiff's special disability in any event.

56 Senior Counsel for the plaintiff argued that the relevance of the plaintiff's judgment against Mavaddat for the amount owing to the Bank was simply that if the plaintiff is successful in this action it would be one of the matters to be taken into account by the Court when framing relief.

57 I should say at the outset that the Bank did not seek to rely on an Anshun estoppel or on issue estoppel. As I understood the Bank's case, there were two primary contentions. First, the plaintiff having obtained judgment against Mavaddat for damages in respect of her liability to the Bank, it is not now open to the plaintiff to pursue this action on the basis that she has no such liability to the Bank. Secondly, the plaintiff having succeeded against Mavaddat on the ground that he was acting as her agent, the plaintiff cannot now contend that Mavaddat was in fact acting as agent for the Bank.

58 Turning to the first point, the Bank relied on the decision of the New South Wales Court of Appeal in VACC Insurance Co Ltd v BP Australia Ltd [1999] NSWCA 427. In that case, a petrol bowser at a BP service station operated by Geselle Investments Pty Ltd ("Geselle") malfunctioned and sprayed petrol on a customer, Mr Clark, resulting in burns. Mr Clark sued Geselle and BP for damages for negligence. He recovered damages against both and exemplary damages against Geselle. The trial Judge found that Geselle was liable because it was the occupier of the premises and had a duty of care to customers such as Mr Clark. It knew about the potential malfunction of the pump but allowed it to continue to be operated pending repairs. The trial Judge found BP liable because the pump had a design fault which should have been known to BP. In contribution proceedings between BP and Geselle, the trial Judge found BP 25 per cent responsible and Geselle 75 per cent responsible for the compensatory damages. Geselle was solely liable for exemplary damages.

59 BP paid the compensatory damages to Mr Clark and commenced proceedings against Geselle's insurer, VACC. Geselle had not pursued a claim for indemnity by VACC. Under the relevant legislation, BP was only entitled to succeed against VACC if Geselle was entitled to indemnity under the policy. The policy provided that VACC was not liable if Geselle had failed to take reasonable precautions to prevent bodily injury and reasonable measures to maintain the plant and equipment in sound condition.

60 The proceedings by BP against VACC were heard by a different Judge to the Clark action. In the BP action, the trial Judge found that while Geselle may have been negligent, it had not disregarded the safety of customers.

61 It was accepted in the Court of Appeal that that finding contradicted the finding made earlier in the Clark action. It was also accepted that the findings of the trial Judge that Geselle had noticed the malfunctioning bowser and permitted it to be used in that condition meant that VACC would not have been liable under the policy.

62 VACC contended that Geselle's recklessness had been conclusively determined in the Clark action and that an issue estoppel operated between BP and VACC as Geselle's "privy". It also relied on Anshun estoppel.

63 In delivering the decision of the Court of Appeal, Fitzgerald JA (with whom Meagher JA agreed) said:

"BP's proceeding against VACC, which was not commenced until after BP's judgment against Geselle was given, does not seek to establish that Geselle or VACC is liable or was liable to BP independently of BP's judgment against Geselle, but relies for that purpose on that judgment, which is used to establish both that Geselle has a legal liability 'to pay ... compensation [to BP] ... in respect of ... bodily injury', and the amount to which BP is legally entitled. However, BP's proceeding, and [the trial Judge's findings] contradicted the findings [of the trial Judge in the Clark action] upon which the amount of Geselle's legal liability, and BP's legal entitlements, are dependent.

'[A] plaintiff is not permitted to 'approbate and reprobate' ... In my opinion, neither Geselle nor BP can at the one time assert against VACC that Geselle is legally liable to BP for the amount of the judgment ... in favour of BP against Geselle and dispute a matter which increased the amount of that judgment ... Irrespective of whether VACC should or could have been joined in the proceeding between BP and Geselle ... it would not be conscionable for Geselle, and it is not conscionable for BP, to allege against VACC a matter ... which contradicts the basis upon which the amount which BP is entitled to recover from Geselle was determined ... The unconscionability is reinforced if VACC could have been joined in the proceeding between BP and Geselle, in which event the present inconsistency of findings would have been avoided and, if Geselle was not reckless, the extent of its responsibility for Mr Clark's damages, as between it and BP, would have been reduced."

64 It is apparent that there is a significant difference between that case and this case. There, BP sought in the second action to recover from Geselle's insurer (whose liability, if any, was coterminous with that of Geselle) on the basis that Geselle had been found liable in the Clark action, but BP sought to do so on a factual basis which was contrary to the factual basis upon which Geselle had been found liable in the Clark action. As Fitzgerald JA pointed out, BP did not seek to establish that Geselle or VACC was liable to BP independently of the judgment in the Clark action, but rather BP relied upon that judgment to establish VACC's liability. It could not do so on the basis of findings of fact inconsistent with that judgment.

65 In the present case, the liability of the plaintiff to the Bank was not the subject of any finding in the Mavaddat action. It was pleaded by the plaintiff and accepted by Mavaddat that such a liability existed. The Court was not required to determine, therefore, whether or not such liability existed. The liability of the plaintiff to the Bank thus arises for consideration by the Court for the first time in this action.

66 The question remains, however, whether the plaintiff, having proceeded in the Mavaddat action on the basis that she had a liability to the Bank, is entitled in this action to assert against the Bank that no such liability exists. I understood the Bank to put this aspect of its case on the basis that for the plaintiff to take such a course would be unconscionable and it would constitute an abuse of process by bringing the administration of justice into disrepute.

67 In Walton v Gardiner (1993) 177 CLR 378 at 393, Mason CJ, Deane and Dawson JJ said, in the context of the power to stay proceedings as an abuse of process, that the jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529 at 536 as "the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people". (See also Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334 at 344; Trade Practices Commission v Kimberley Homes Pty Ltd (1989) 217 ALR 110 at 114 and Batistatos v Roads & Traffic Authority of New South Wales [2006] HCA 27; (2006) 80 ALJR 1100 at [6] per Gleeson CJ, Gummow, Hayne and Crennan JJ, at [142] per Kirby J.)

68 In R v Carroll (2002) 213 CLR 635 at 657, Gaudron and Gummow JJ said that "the circumstances in which proceedings will constitute an abuse of process cannot be exhaustively defined and, in some cases, minds may differ as to whether they do constitute an abuse". Similarly, in Batistatos (supra), Gleeson CJ, Gummow, Hayne and Crennan JJ said (at [7]) that "[w]hat amounts to abuse of court process is insusceptible of a formulation comprising closed categories."

69 In Rogers v The Queen (1994) 181 CLR 251, McHugh J observed (at 286):

"Inherent in every court of justice is the power to prevent its procedures being abused. Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories:

(1) the court's procedures are invoked for an illegitimate purpose;

(2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or

(3) the use of the court's procedures would bring the administration of justice into disrepute."

"The circumstances in which abuse of process may arise are extremely varied and it would be unwise to limit those circumstances to fixed categories. Likewise, it would be a mistake to treat the discussion in judgments of particular circumstances as necessarily confining the concept of abuse of process."

71 What is clear, however, is that the concept extends generally to proceedings that are such as to "bring the administration of justice into disrepute" (Rogers, ibid): see, generally, Batistatos (supra) at [14] - [15]. It is not possible to define the circumstances which will constitute bringing the administration of justice into disrepute. That concept was described in IGA Distribution Pty Limited v Gow [2006] HCA 41 by Callinan and Heydon JJ (at [266]) as "indeterminate". And French J observed in Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 (at [62]), that "the category of 'right-thinking people' is elusive. However the passage may be taken as emphasising that the task of the judge in such a case is evaluative".

72 In Spalla v St George Motor Finance Ltd (No 6) (supra), French J said (at 69):

"The public interest considerations underlying the power of courts to stay or dismiss the proceedings for abuse of process extend to preventing the waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. They include the necessity of maintaining confidence in, and respect for, the authority of the courts - Sea Culture International v Scoles [1991] FCA 523; (1991) 32 FCR 275 (at 279 French J); Djaigween v Douglas [1994] FCA 951; (1994) 48 FCR 535 (at 545 Carr J)."

73 It is, however, plainly a jurisdiction to be exercised cautiously. The observations of Dixon J in Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713 at 720 are, in my view, apposite to the present application:

"The inherent jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff. The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped."

74 In the present case it is, in my view, important to bear in mind that the question of the liability of the plaintiff to the Bank was not put in issue in the Mavaddat action and was not the subject of any determination by the Court, but that that liability was common ground between the parties. The plaintiff's case in this action is not, therefore, in that respect at least, inconsistent with any finding by the Court in the Mavaddat action.

75 It is, moreover, the case, as submitted by Senior Counsel for the plaintiff, that there could have been no objection to the two cases being heard together, the plaintiff's position in that situation being, in effect, in the alternative. The relief that the Court would have granted would then have been moulded to suit the findings ultimately made in the two actions. The question that now arises is whether the plaintiff's claim against the Bank should be stayed because, instead of that course, the plaintiff has had Mavaddat's liability to her determined on the basis that she is liable to the Bank, before it was determined whether she was in fact liable to the Bank.

76 There may well have been good reason that the plaintiff took the course she did, although the efficient use of court resources and the ultimate costs of at least some of the parties might well have been better served had the two actions been heard together. That, however, in my view is a matter that ultimately is more appropriately treated as bearing upon the question of the costs of the action. What is more significant for present purposes is that the Mavaddat action did not involve a determination of the question of the plaintiff's liability to the Bank. Had it done so, I think it is clear that the current action would not be maintainable. But the fact that the Mavaddat action proceeded on the uncontested basis, or assumption, that the plaintiff's liability to the Bank existed is not sufficient, in my view, to constitute an abuse of process so as to warrant a stay of this action. It does not visit any prejudice or harm on the Bank and, in the absence of any findings of the Court in the Mavaddat action as to the plaintiff's liability to the Bank, in my view it cannot be said that it brings the administration of justice into disrepute to put that liability in issue in this action.

77 It is necessary, then, to turn to the second ground relied upon by the Bank, namely, that this action would be an abuse of process in that the plaintiff seeks to relitigate an issue which has already been disposed of in the Mavaddat action, namely that Mavaddat was at all material times acting as the plaintiff's agent, not as the Bank's agent.

78 In Reichel v Magrath (1889) 14 App Cas 665, Lord Halsbury said (at 668):

"[I]t would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were permitted by changing the form of proceedings to set up the same case again ...

I believe there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure."

79 That case has been accepted as good law in Australia: Walton v Gardiner (supra) at 393.

80 In Coffey v Secretary, Department of Social Security [1999] FCA 375; (1999) 86 FCR 434, the Full Court of the Federal Court said (at 443):

"An attempt to litigate in the Court a dispute or issue which has been resolved in earlier litigation in another court or tribunal may constitute an abuse of process even though the earlier proceeding did not give rise to a res judicata or issue estoppel: see Sea Culture International v Scoles [1991] FCA 523; (1991) 32 FCR 275 at 279 and Walton v Gardiner (1993) 177 CLR 378 at 393 - 394. Whether it does depends on the facts of the particular case."

81 The New South Wales Court of Appeal observed in Tiufino v Warland [2000] NSWCA 110; (2000) 50 NSWLR 104, that it has long been established that proceedings which seek to relitigate some question which technically is not covered by an issue estoppel may be stayed or dismissed as an abuse of process. In Arthur J S Hall & Co (A Firm) v Simons [2002] 1 AC 615 at 701, Lord Hoffman said that there is "a general public interest in the same issue not being litigated over again".

82 In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423 (64,089), a case involving abuse of process in seeking to relitigate an issue, Giles CJ described the relevant considerations as follows:

"One category of case where abuse of process may exist is where a party seeks to relitigate an issue already decided. Principles of res judicata and issue estoppel will preclude relitigation of an issue between the same parties. These principles can be seen as founded on the same considerations as those informing the jurisdiction to stay proceedings for abuse of process. But there may be abuse of process warranting a stay where a party seeks to relitigate an issue decided between himself and a third party.

... whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are -

(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b) the opportunity available and taken to fully litigate the issue;

(c) the terms and finality of the finding as to the issue;

(d) the identity between the relevant issues in the two proceedings;

(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; ...

(f) the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process."

83 That passage was referred to with approval by the Court of Appeal of New South Wales in Rippon v Chilcotin Pty Ltd (supra) at 204 and by the Court of Appeal of this Court in Re Griffiths; Ex parte Homestyle Pty Ltd [2005] WASCA 103 at [29].

84 Heydon JA (as his Honour then was) pointed out in R v O'Halloran [2000] NSWCCA 528; (2000) 159 FLR 260 (at 293) that the first four considerations enumerated in State Bank of New South Wales Ltd v Stenhouse Ltd (supra) "turn on precise identification of the issues".

85 The first question, it seems to me, is whether any of the findings in the Mavaddat action conflict with the case which the plaintiff now seeks to advance against the Bank.

86 I accept as a general principle the submission of Senior Counsel for the plaintiff that a person may act for more than one party in a transaction, and may have a number of ad hoc agencies in connection with the transaction: Mercantile Credit Co Ltd v Hamblin [1964] 3 All ER 592, Branwhite v Worcester Works Finance Ltd [1968] 3 All ER 104. The question, however, is whether the findings in the Mavaddat action are necessarily inconsistent or irreconcilable with the plaintiff's case in the current action that Mavaddat acted as the agent of the Bank in the respects now pleaded.

87 I do not consider there is any necessary inconsistency between, on the one hand, the plaintiff's plea - and the finding by Roberts-Smith J - in the Mavaddat action, that in his dealings with the Bank Mavaddat acted as the agent of the plaintiff and, on the other hand, the plaintiff's claim in the present case that in procuring her execution of the loan documents Mavaddat was acting as the agent of the Bank. As Senior Counsel for the plaintiff submitted, they are distinct dealings, one with the Bank and the other with the plaintiff.

88 I also do not consider that the plea in the current action that Mavaddat was acting as the agent of the Bank in procuring the plaintiff's execution of the documents is necessarily inconsistent with the plea - and the finding - in the Mavaddat action that Mavaddat's conduct in relation to the plaintiff in connection with the execution of the documents was in breach of fiduciary duties he owed to her as a partner, constituted the exercise of undue influence on his part and amounted to unconscionable conduct on his part.

89 Senior Counsel for the Bank submitted that Mavaddat could not be liable as a principal for misleading and deceptive conduct for making the representations to the plaintiff - as he was found to be in the Mavaddat action - if in fact he was acting as the agent of the Bank in making those representations. It was therefore a necessary corollary of the finding in the Mavaddat action that Mavaddat was liable for misleading and deceptive conduct in connection with the execution of the loan agreement and mortgage by the plaintiff that he was not acting for the Bank.

90 Assuming for present purposes that the relevant conduct of Mavaddat is identical in both cases, the question is whether in the current action a finding that in engaging in that conduct Mavaddat was acting as the agent of the Bank would be inconsistent with the finding in the Mavaddat action that he was personally liable for misleading or deceptive conduct under the Fair Trading Act.

91 I do not consider that the answer to that is clear. There is certainly authority which suggests that under the Fair Trading Act both a principal and their agent can be directly liable for misleading or deceptive conduct of the agent within the scope of the agency: see, for example, Wong v Citibank Ltd [2004] NSWCA 396; Arms v Houghton [2006] FCAFC 46; Astvilla Pty Ltd v Director of Consumer Affairs [2006] VSC 289.

92 In Arms v Houghton (supra), the employer had been found liable at first instance for misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) in respect of representations made by two employees, but the claim against the employees for misleading or deceptive conduct under s 9 of the Fair Trading Act 1999 (Vic) in respect of the representations was dismissed on the ground that an employee is not personally liable for statements made in the course of his employment. That decision was reversed by the Full Federal Court which held that under the Fair Trading Act (Vic) an employee shares a co-extensive primary liability with their employer for misleading and deceptive conduct in which the employee engages on the employer's behalf. Judgment was entered against the employees. Leave to appeal to the High Court from that decision has been granted: Houghton v Arms [2006] HCATrans 411 (4 August 2006).

93 If Mavaddat may be directly liable under the Fair Trading Act, even if he were acting for the Bank, there would seem to be no necessary obstacle to the Bank being directly liable in the current action under s 12DA of the ASIC Act in respect of the same conduct for which Mavaddat had been found liable for misleading and deceptive conduct in the Mavaddat action. That is, there is not, in my view, any necessary inconsistency between the finding in the Mavaddat action that Mavaddat was directly liable for misleading and deceptive conduct, and the plaintiff's claim in this action that Mavaddat was acting as the agent of the Bank in respect of the same conduct.

94 It is true that in the Mavaddat action there was no reference to Mavaddat acting as the agent of the Bank but I do not consider that that is necessarily fatal to the claims sought to be pressed in this action. As Senior Counsel for the plaintiff argued, it was not necessary to assert the Bank agency in order to establish Mavaddat's liability to the plaintiff. And while it may seem odd that in the Mavaddat action the case was run without alluding to such a connection, in my view it would be going too far to say that the absence of any reference to Mavaddat acting as an agent of the Bank has the result that it would now be inconsistent for the plaintiff to assert it in this action as the basis of the Bank's alleged liability.

95 I do not consider that Rippon v Chilcotin (supra) assists the Bank in that regard. In that case the purchasers of a business failed against the vendor in a claim under s 52 of the Trade Practices Act in which the purchasers had asserted that they had acted in reliance upon the vendor's 1991 financial statements in purchasing the business, those financial statements having misstated the profitability of the business. The trial Judge found that the purchasers had not relied on the 1991 financial statements. The purchasers then brought an action against the accountant who had prepared the 1991 financial statements and earlier financial statements with which the purchasers had been provided. The Court of Appeal of New South Wales held that the action was an abuse of process as it threatened the integrity of the administration of justice and raised the prospect of conflicting decisions. The issue of reliance was an essential constituent of the purchasers' cause of action and the earlier finding that the purchasers had not relied upon the 1991 financial statements related to an ultimate fact, fundamental to the decision, which formed part of the right in issue. The purchasers were attempting to relitigate the issue of reliance on the 1991 financial statements which they had lost in the earlier action, and if they could not succeed in respect of the 1991 financial statements because they did not rely on them they could hardly succeed in establishing reliance on the earlier financial statements.

96 I do not consider that that case is authority for the wider proposition contended for by the Bank, in effect, that where liability is attributed to the conduct of a particular party without reference to the involvement of any other party, it is inherent that the issue of liability has been finally resolved - that it "necessarily covers the field" - so there is no room later to seek to attribute liability to any other party. I also do not consider that anything said in West v Jackson McDonald (supra) or Davey v Ron Farris Real Estate Pty Ltd (supra) assists the Bank, those cases applying established principles and depending upon their particular facts.

97 There is, in connection with the application for a stay, the further consideration that in this action there is a claim of negligence against the Bank that is not dependant upon a finding that Mavaddat was the agent of the Bank. It is alleged, in essence, that the Bank owed to the plaintiff a duty of care to ensure that before she executed the documents she had independent advice as to their meaning and effect and her potential liability, and had the documents translated into her native language. It is alleged that the Bank failed to do so and that those things did not occur.

98 That claim, it seems to me, is quite distinct from any claim raised in the Mavaddat action and it does not seem to me that any finding in the Mavaddat action is necessarily inconsistent with that claim. As it is pleaded, it is likely, however, that much of the factual evidence which would be relevant to the other claims will, in any event, have to be canvassed in relation to the claim in negligence.

99 It was also submitted on behalf of the plaintiff that the claim of unconscionable conduct does not depend upon a finding that Mavaddat was the agent of the Bank. I do not accept that submission in respect of the plea in the minute of substituted statement of claim of June 2006. It is there pleaded that the conduct of the Bank which is said to be unconscionable is "the conduct of the [Bank] by its agent Mavaddat pleaded in paragraphs 5-7 and 9-12 hereof ...". But I accept that, as I understood Senior Counsel for the plaintiff to contend, that an arguable plea of unconscionable conduct on the Bank's part could (and I took it, would, if necessary) be formulated without reference to any question of agency, the necessary elements of the Bank's knowledge being arguably capable of being made out from documents provided to it.

100 It is a serious step to deny a plaintiff the opportunity to put their case at trial. In circumstances such as the present, the inherent jurisdiction to stay an action as an abuse of process is to be exercised with caution and a stay ordered only in a clear case. I do not consider that this is a clear case. I do not consider it is sufficient to justify a stay that the Mavaddat action proceeded on the basis of an assumed liability that is now put in issue in this action and I do not consider that the plaintiff's claim in this action involves the relitigation of issues decided in the Mavaddat action or is clearly in conflict with any finding in the Mavaddat action. There is, in addition, at least one cause of action in the current action which is quite separate from the matters litigated in the Mavaddat action, but in respect of which much of the same evidence is likely to be canvassed. There is no basis, in my view, upon which it can be said that that claim constitutes an abuse of process.

101 In the circumstances, I do not consider that the application for a stay has been made out and I would therefore dismiss the application. It was, I think, accepted by the Bank that in that event the application for summary judgment must also be dismissed.

102 I will hear the parties on the appropriate form of orders and on costs.

Securities and Investments Commission Act 1989

Lee v St George Bank Ltd [2006] WASC 221

At a glance

Court

Decision date

Before

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Catchwords

Judgment (155 paragraphs)

Lee v St George Bank Ltd [2006] WASC 221 (29 September 2006)

Parties

Legislation Cited (4)

Cases Cited (19)