National Australia Bank Limited v Sahin & Anor [2011] VSC 505

1 In May 2010, National Australia Bank Ltd (NAB) commenced proceedings in this court against the Sahins (the defendants) for possession of land following an alleged default under a mortgage. The land is situated at 12 Olympic Way, Mildura in the State of Victoria. The mortgage secured a debt owing under a home loan facility, agreed in August 2004. The default alleged was the defendants' failure since March 2006 to make repayments. By their defence, the Sahins deny any obligation to make further repayments, asserting a counterclaim for compensatory and exemplary/punitive damages from NAB and the second defendant to the counterclaim, National Australia Financial Management Ltd (NAFM) for, among other things, deceit.

2 The Sahins initiated another proceeding between the parties, that was lost at trial in the County Court but won in the Court of Appeal. Broadly, the Sahins entered into a second (refinancing) facility in reliance upon certain representations concerning disability insurance cover. In October 2004, when Mrs Sahin became disabled, the policy was no longer available and NAB and NAFM refused to reinstate the policy and indemnify Mrs Sahin. The Sahins defaulted in making repayments, the circumstances which found this action for possession. However, the judgment entered in the Court of Appeal restored their position. NAB accepts that the possession proceeding must be discontinued.

3 In May 2011, an associate justice granted leave to NAB to discontinue its proceeding and, accepting there was a good defence of estoppel by record, permanently stayed the counterclaim under r 23.01(1)(c) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (the Rules). The counterclaim was stayed because the claims made are an abuse of process. The Sahins are attempting to re-litigate matters dealt with in the County Court. As there was a successful appeal to the Court of Appeal it is to that judgment that regard must be had.

4 The Sahins appeal to this court by rehearing under r 77.06 against part of the associate justice's order, the permanent staying of their counterclaim.

5 The issue to be determined on this application is whether the Sahins can maintain a second proceeding (by their counterclaim). NAB and NAFM contend the cause of action in the second proceeding no longer exists, having been subsumed into the earlier judgment - it is res judicata. Further, NAB and NAFM contend there is an issue estoppel with respect to the issue of damages. Alternatively, the Sahins are estopped from maintaining their counterclaim by the principles stated in Port of Melbourne Authority v Anshun Pty Ltd.[1]

6 In order to understand the issues, it is convenient to briefly recite the history of the dealings between the Sahins and NAB and NAFM.[2] The Sahins purchased the property in Olympic Way, Mildura as a building block. They started erecting a house on that land as owner-builders. Requiring finance to complete construction of the house, they obtained a loan of $110,000 from NAB. At the time, on NAB's advice, the Sahins purchased a policy of consumer credit insurance from NAFM. The loan insurance premium was added to the loan amount.

7 Within a year that loan was fully drawn. Further funds were required to complete construction and the Sahins obtained further finance of $23,000. NAB structured the second loan on terms that the first loan would be repaid, and the second loan would be made for the outstanding balance on the first loan and the further $23,000, a total of $133,000. The issue was the policy of consumer credit insurance for the second loan.

8 Mrs Sahin was the only employed borrower and when she was injured in a workplace accident in October 2004, a claim was made on the policy. The claim was rejected on the basis that the policy had terminated when the first loan was repaid. However, the Sahins understood that the policy of consumer credit insurance continued to cover the second loan. They claimed to have been misled or deceived. NAB contended that it had offered the Sahins loan insurance at the time of arranging the second loan but that the offer had been declined. A further issue concerned correspondence about the fact of cancellation of the policy.

9 In January 2009, the Sahins commenced a County Court proceeding against NAB and NAFM, seeking orders:

(a) that NAFM pay NAB loan payments on behalf of the Sahins as required by the loan facility agreement;

(b) re-opening a loan cover insurance contract under s 70(1) of the Consumer Credit Code and/or ss 59 and 63 of the Insurance Contracts Act 1984 (Cth);

(d) for the return of loan payments made on the loan contract from the 'beginning of the claim'; and

10 In November 2009, judgment was entered in the County Court proceeding for NAB and NAFM. The Sahins appealed. The pleadings in this proceeding were served during the period when the appeal was pending, but it was agreed that further prosecution of the possession proceeding ought to await the outcome of the appeal.

11 Throughout each proceeding the Sahins had not engaged legal practitioners to assist them. The statement of claim makes many detailed allegations of fact which I will not repeat. The essence of the conduct alleged against NAB and NAFM in the first proceeding is as follows:

• NAB and NAFM represented that the Sahins had retained loan cover insurance from NAFM on the second loan.
• This representation induced the Sahins to enter into the credit contract for the second loan.
• The representation was false and untrue.
• NAFM's cancellation of the policy was in contravention of the Insurance Contracts Act 1984 (Cth) and is ineffectual.
• NAB and NAFM engaged in unconscionable conduct in the circumstances of the second loan. The features of unconscionability alleged were these: the terms of the loan were not negotiable, imposing unreasonably difficult conditions or conditions not reasonably necessary to protect the legitimate interests of the defendants; the customer information brochure was an incomprehensible document that was not accurately explained to Mr and Mrs Sahin; the Sahins did not receive independent legal or other expert advice; and the defendants did not ensure that the Sahins understood the nature of the transaction.
• The representations and conduct of NAB and NAFM engendered and fostered in the Sahins an understanding and expectation that NAFM would pay to NAB the loan repayments for the second loan if the policy was engaged. The Sahins acted to their detriment and altered their position. They refrained from entering into a further policy of insurance. NAFM is estopped from denying it is obliged to indemnify the Sahins and must pay NAB the loan repayments in respect of the second loan.
• NAB and NAFM made fraudulent misrepresentations. This allegation was based on a computer file note containing the annotation, 'no loan cover wanted on loan not interested'. It was alleged this document was fabricated. The Sahins also pointed to inconsistencies in events which suggested a 'cover up'.

There is also a confusing pleading of a failure on the part of each of NAB and NAFM 'in their duty of care'.

12 The Sahins alleged that they had suffered loss and damage by this conduct, which was false or misleading;[3] or in breach of the Insurance Contracts Act 1984 (Cth) or in breach of 'the duty'. The loss and damage claimed in the proceeding was particularised. Two heads of damage were claimed:

1. liability for interest and default charges under the second contract from October 2004; and
2. continuing and loss of the benefit from the policy or an alternative policy.

There was no claim for exemplary or punitive damages, either as a particularised head of damage, or by allegation of material facts on which damages of this sort might be awarded.

• a declaration that for the period from October 2004 onwards, NAFM is estopped from denying that it is obliged to pay NAB the loan repayments on behalf of the Sahins under the second loan;
• an order re-opening the loan cover insurance contract under s 70(1) of the Consumer Credit Code and/or ss 59 and 63 of the Insurance Contracts Act 1984 (Cth);
• damages;
• return of loan payments made by the Sahins on the second loan after the claim was made on the policy; and
• interest and costs.

14 On 8 March 2011, the appeal was allowed. The Court of Appeal considered it was in as good a position as the trial judge to assess the evidence as a whole, and it did so. The Court of Appeal invited the parties to consider the terms of a proposed order and heard submissions as to the proper form of the judgment to be entered. The judgment of the County Court was set aside and judgment entered for the Sahins with costs. The terms of the policy issued by NAFM were varied to provide loan insurance cover to Mrs Sahin in respect of the home loan facility, and NAB was ordered to refund certain loan instalments paid by the Sahins after the policy ought to have responded, had it been in place.

15 Effectively, the Court of Appeal declared that NAFM was obliged under the policy to pay NAB loan instalments since August 2004, and for so long as its policy responded to Mrs Sahin's disability. The loan facility was regularised and the policy reinstated. The Sahins were no longer in default under the loan facility and mortgage. Hence the decision of NAB, as I have noted, to discontinue the possession proceeding.

Causes of action alleged in the second proceeding

16 In the second proceeding, the Sahins claim damages, both compensatory and exemplary/punitive. The nature of the loss and damage alleged is not revealed by their counterclaim. There are no particulars of loss and damage because they make no allegation that loss and damage has been suffered by reason of the matters alleged in the counterclaim. At once, a difficulty arises for the Sahins to which I will later return.

17 Although the allegations in the counterclaim are stated in different terms, they are based in the same circumstances as the judgment in the first proceeding. The Sahins allege that in July 2003 they entered into a credit contract with NAB. This is the first loan for $110,000. The Sahins allege they received advice from NAB to obtain loan cover insurance from NAFM and were provided with a customer information brochure. Relying on and induced by the advice from NAB and the terms of the customer information brochure, Mrs Sahin applied for a loan cover insurance policy. Other allegations made, but not developed into any recognisable cause of action, include allegations that terms of the brochure about the policy were false, that documents to be forwarded to the Sahins were not sent, and that NAFM failed in a duty of care and breached the Insurance Contracts Act 1984 (Cth) in not sending documents to Mrs Sahin. The Sahins allege that they were induced to take the second loan ($133,000, in total) by the representation that they had, and retained, loan cover insurance from NAFM. Although the consequences are expressed differently, particularly in relation to breach of a duty of care, the counterclaim alleges the refusal of NAFM to indemnify Mrs Sahin against the loan repayments and the consequent refusal of the Sahins to make further repayment. All these allegations are in the same terms as in the first proceeding.

18 The Sahins claim the allegations now develop into a different cause of action not considered in the first proceeding - the deceit claim. An allegation follows that because of the matters I have already noted, NAB and NAFM 'resorted to fraudulent misrepresentation' in three respects:

1. NAB and NAFM represented that the Sahins had declined an offer of loan cover insurance;

2. Bank statements did not show any premium deductions; and

3. NAFM represented it had sent a notice of cancellation of the policy.

The Sahins contend that NAB and NAFM knew these representations were false, misleading and deceptive, and 'made fraudulently in tort of deceit', and NAB is seeking to take advantage of the deception by seeking possession. Further, the fraudulent misrepresentations were intended to deprive Mrs Sahin of indemnity under the insurance policy and showed contumelious disregard for the rights of Mr and Mrs Sahin.

19 Mr Sahin submitted that it is a serious step to deny a plaintiff an opportunity to put a case at trial, and that the court must cautiously exercise its jurisdiction to stay an action as an abuse of process and only order a stay in the clearest of cases. This proposition is not in dispute. The court has consistently taken the view that the power to summarily dismiss a claim must be exercised sparingly.[4]

20 In moving for summary dismissal, a party may rely on r 23.01 of the Rules, s 63 of the Civil Procedure Act 2010 (Vic) and/or the court's inherent jurisdiction. In Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd,[5] I considered the extent to which the traditional approach on such applications had been relaxed by the provisions of s 63 of the Civil Procedure Act. I will not repeat what I said there. I am approaching this application on the same basis. Nothing in those observations detracts from the approach noted by Davies J in Re Twenty-First Larena Pty Ltd: Maximova v Goodin,[6] that the courts have not hesitated to dismiss an action summarily when a plea of res judicata is substantiated.[7]

21 Mr Sahin submitted there was unacceptable delay in seeking summary judgment on the counterclaim in the possession proceeding. NAB and NAFM were obliged to bring this application promptly after receipt of the counterclaim; their failure to do so constitutes a waiver of their rights. Mr Sahin asserted prejudice on the basis that if the application succeeds, he will be denied a trial. It was clear that the trial Mr Sahin seeks is a trial of his cause of action in deceit. There is no substance in the submission, neither in the allegation of unacceptable delay nor the allegation of relevant prejudice caused by that delay.

22 Mr Sahin did not dispute that, in substance, the deceit claim arose on the same facts as were litigated to judgment in the first proceeding, and that Mr Sahin thought so from at least three weeks prior to the County Court trial. Mr Sahin frankly conceded that he thought the insurance proceeding and deceit claim should be heard separately, but he later recognised that the deceit claim should be heard with the insurance claim in the one proceeding. Mr Sahin's opposed application, made approximately three weeks prior to commencement of trial, to amend the claim in the County Court proceeding to include the deceit claim, failed. That application was not made to the trial judge. However, it was renewed before and rejected by the trial judge at commencement of the trial.

23 I make two further observations. First, neither decision of the County Court judge to refuse the amendment was appealed. More significantly, the Court of Appeal carefully considered all of the material facts on which the deceit claim is now said to be based. Grounds 13 to 15 of the notice of appeal directly raised a claim for fraudulent misrepresentation. Again, Mr Sahin frankly conceded that the deceit claim is based upon the same facts as were considered by the Court of Appeal, but he contended different causes of action can arise from the same facts. Mr Sahin's concern is that the Sahins cannot claim punitive damages without the deceit claim. It is the entitlement to punitive damages in deceit that is the cause of action that Mr Sahin contends has not been adjudicated upon. Mr Sahin asserted that that cause of action had not been adjudicated upon because the amendment was opposed. He stated, 'If they didn't oppose it, it would have been dealt with. There would be no need for a second proceeding'.

24 Mr Sahin submitted that Anshun estoppel principles are inapplicable where a party has sought, but has been refused, leave to raise a matter in earlier proceedings. It cannot be said that such a party has allowed the point to pass by through negligence, inadvertence or even accident and thereafter ought not to be allowed to seek to raise the matter.[8]

25 I noted earlier the absence of any plea of loss and damage in the counterclaim. In argument, I invited Mr Sahin to identify the nature of the relief sought by the counterclaim. He responded that he and his wife want punitive and compensatory damages for what they have been through over the last five years. Invited to explain what 'they had been through', Mr Sahin stated he had spent thousands of hours on this case. His life had been consumed by it. He has suffered stress and depression and the case has affected their lives.

26 Both res judicata and issue estoppel require that there is identity of parties.[9] Here it is plain that in each proceeding the parties are identical. The essential characteristic of a final judgment is that it determines finally the dispute between the parties. Once a final judgment is reversed on appeal, it ceases to give rise to an estoppel.[10] Unless the appellate court merely directs a new trial when an appeal is allowed, in which case no estoppel arises from the first judgment, the estoppel stems from the appellate decision.[11]

27 To determine whether the defence for NAB and NAFM must succeed, it is necessary to identify the cause(s) of action upon which the Sahins succeeded in the first proceeding.[12] Whether a cause of action estoppel or an issue estoppel exists is determined objectively. A cause of action estoppel will be found where the cause of action in the later proceeding is in substance the same as that litigated to judgment in the earlier proceeding. For issue estoppel, the test is whether the precise question of fact or law sought to be litigated in the later proceeding was decided as a fundamental basis for the decision in the earlier proceeding. The scope of the defence widens, by reference to Anshun principles, where the cause of action or precise question of fact or law in the later proceeding is a new point that properly belonged to the subject of litigation in the earlier proceeding.[13]

28 In determining whether a proceeding is based on a cause of action upon which judgment has been entered, it is important to note the imprecision in the phrase 'cause of action'.[14] I agree, with respect, with the recent observations of Davies J in Re Twenty-First Larena Pty Ltd; Maximova v Goodin:[15]

As the cases illustrate, the doctrine may apply to causes of action other than the precise one sued on in a preceding action where the cause of action previously adjudicated is substantially the same as the cause of action in the subsequent proceeding ... it is not the legal form of a cause of action to which consideration should be directed but rather, whether the controversy in the subsequent action, as a matter of substance, is the same as the controversy determined in the first proceeding.[16]

29 Turning to the reasoning of the Court of Appeal, the issues are clear. Did the Court of Appeal's resolution of the first proceeding effectively determine the deceit cause of action? Did it determine the essential factual and legal issues that found the deceit cause of action? If it did not, is the question of damages, whether compensatory or exemplary, a new point which properly belonged to the subject of litigation in the earlier proceeding.

Resolution of the first proceeding by the Court of Appeal

30 The Court of Appeal rejected a submission by NAB and NAFM that it should not interfere with any of the factual findings made by the primary judge, as those findings were based on the judge's view of the witnesses' credibility. Having decided that the Court of Appeal was in as good a position as the trial judge to assess the probabilities on the evidence as a whole, and must do so in order to comply with its duty to afford the Sahins a true right of appeal in the nature of a rehearing, Hargrave AJA, delivering the leading judgment, set out a careful and detailed analysis of the whole of the evidence at the trial of the first proceeding.

31 Hargrave AJA dealt with and made findings of fact concerning:

• communications between NAB's employees and the Sahins when the first loan was arranged;
• the credit information brochure;
• the terms of the policy of credit insurance;
• the communications between the Sahins and NAB's employees on the occasion of the second loan;
• correspondence and notices sent to the Sahins by NAB and NAFM; and
• a challenge to the authenticity of notes recorded in the computer system, including the allegation they are the result of a fraudulent conspiracy.

32 In particular, Hargrave AJA dealt at length with the evidence at the trial of the conversations between the Sahins and Mrs Davis on 14 July 2004, including the computer records generated in respect of that conversation.[17] He also dealt with the entries in NAB statements and with the issues concerning notice of cancellation of the policy. These matters are the allegations particularised in the counterclaim as the basis of the deceit claim. Each of these issues formed part of the finding made by the Court of Appeal, that misleading or deceptive conduct had been established against NAB and NAFM. Further, Hargrave AJA examined specifically the computer notes, a central plank in Mr and Mrs Sahin's allegations in the counterclaim, in the context of the claims pleaded in the first proceeding, finding that the Sahins made out a case of false or misleading conduct.[18]

33 Although the finding is against NAB and NAFM, it does not extend to whether such conduct was engaged in with the intent or state of mind necessary to make out the tort of deceit. Unlike the statutory cause of action under the Trade Practices Act 1974 (Cth), deceit requires that the false representation is made by the defendant, knowing of its falsity, or reckless as to its truth, with the intention that it will be relied on, and resulting in damage being suffered.

34 The issue of fraudulent intention was central to the evidentiary findings made by Hargrave AJA although deceit was not a claim in the proceeding at trial.[19] The central misrepresentation relied on by the Sahins in the counterclaim is the statement of Mrs Davis in the 14 July meeting, which I have referred to above. The evidence at trial involved examination of issues of fraudulent intent on the part of Mrs Davis in the 14 July meeting. It was put in cross-examination of witnesses, and in submissions, as critical to accepting the Sahins' contention that they did not decline the offer of loan insurance for the refinancing or the further advance of $33,000 that the contrary proposition of Mrs Davis was a fraud.

35 In this context, findings in relation to fraudulent intent were relevant and Hargrave AJA examined the issue because of the trial judge's reasoning in dismissing the claim. His Honour said:

The trial judge decided that all of the claims made by Mr and Mrs Sahin were defeated by his factual findings that Mrs Davis offered loan insurance to Mr and Mrs Sahin during the course of the 14 July meeting, and they declined that offer. His Honour reasoned as follows. First, his Honour found that the computer notes made by Mrs Davis on 15 July 2004 concerning the 14 July meeting were not made fraudulently, as claimed by Mr and Mrs Sahin, but were genuine contemporaneous notes made by Mrs Davis. For the reasons given by the trial judge, that finding should be accepted. Second, the trial judge considered the credibility of witnesses. As I have said, his only adverse comments were directed at the credibility of Mrs Davis ... it is probable that Mrs Davis's evidence was all reconstruction based on documents, and should have been rejected by the trial judge on that basis. Alternatively, at the very least, her evidence was so infected by reconstruction that the trial judge ought to have given it no weight unless it was consistent with the evidence of Mr Sahin or the probabilities required its acceptance ... The reconstructed evidence of Mrs Davis was not transformed into reliable recollection, simply because the computer notes were genuine. Her evidence remained as reconstruction, leaving the computer notes to speak for themselves. Stripped of the gloss given by Mrs Davis's reconstructed oral evidence, the computer notes are, for the reasons given above, a most ambiguous and unreliable guide to the content of the conversation during the 14 July meeting concerning loan insurance. In circumstances where I do not accept Mrs Davis' evidence that she explained to Mr and Mrs Sahin that the effect of the new loan structure imposed by the bank would be to terminate the existing loan insurance, about which the computer notes say nothing, an offer by Mrs Davis of 'loan cover' was likely to mislead. Mr and Mrs Sahin gave evidence that they were misled, stating that they believed the loan insurance would be renewed automatically. I accept that evidence.[20]

36 The scope of the conduct forming part of the cause of action, accepted as established by the Court of Appeal, was summarised by Hargrave AJA in these terms:

In this case, the relevant conduct of the bank and the insurer included: (1) the way in which Mr Moss dealt with the insurance cover in respect of the first loan, where a full explanation was given as to all relevant matters and a signed acknowledgment was obtained in accordance with the bank's forms and procedures; (2) the correspondence sent by the bank and the insurer, and received by Mr and Mrs Sahin; (3) the failure of Mrs Davis to give Mr and Mrs Sahin a clear explanation of the effect on the loan insurance of the new loan structure insisted upon by the bank; (4) the failure of the insurer to send the cancellation letter to the correct address; and (5) the failure of Mrs Davis to apply the bank's prudent procedure of obtaining a signed acknowledgment by Mr and Mrs Sahin concerning loan insurance. Viewed as a whole, that conduct was misleading and deceptive. As a result Mr and Mrs Sahin were led into error. They believed that the loan insurance covered the second loan and would be automatically renewed. As a result of being misled in this way, they lost the opportunity to obtain loan insurance cover, and have been left without cover in circumstances where Mrs Sahin is disabled and unable to work. The judge ought to have so found, and allowed their claim on this basis.

Moreover, by the cancellation notice being sent to the wrong address, the insurer acted in breach of contract. The policy requires such notices to be sent to the 'last known' address of the insured. The insurer clearly did not do this, as the correct address was well known and had previously been used. It appears that the insurer did not use its past experience and update its records. The evidence of Mr and Mrs Sahin that they did not receive the notice of cancellation should be accepted. Accordingly, the breach of contract also caused them to be deprived of the opportunity to make a fully informed decision as to their insurance needs. On the evidence as a whole, their evidence that they would have sought insurance if they had known they had no cover should be accepted. As I have said, the trial judge made no findings critical of their evidence.[21]

37 I consider that the plea of res judicata has been substantiated and that the counterclaim should be summarily dismissed.

38 In my view, there can be no doubt that the precise questions of fact that support the cause of action in deceit now being asserted, were not only squarely raised in the earlier proceeding but were fundamental to the finding in the earlier proceeding of deceptive or misleading conduct on the part of NAB and NAFM. In the circumstances as they unfolded, the examination of the evidence at the trial by the Court of Appeal included examination of the issue of fraudulent intention, even though deceit was not a cause of action before the court. Upon careful examination of the issues that were raised and decided in the first proceeding, the substance of that proceeding is clearly the same as the substance of this proceeding. The consideration of the essential facts on the proposed deceit claim in the first proceeding has merged into the judgment on the statutory claim in the first proceeding. Moreover, in the Court of Appeal, those factual disputes were decided in favour of Mr and Mrs Sahin. They founded the judgment entered in their favour. In the result they were afforded substantive relief. There is a res judicata.

39 It may be that because that relief was not in the form of compensatory damages but, beneficially for the Sahins, relief fashioned pursuant to s 87(2)(b) of the Trade Practices Act 1974 (Cth) that a misconception has arisen for the Sahins. The question of damages has been resolved by the judgment in the first proceeding.

40 The Sahins assert an entitlement to exemplary damages,[22] it seems, to punish NAB and NAFM for the conduct attributed to them. There is also a suggestion of aggravated damages or mental distress damages, perhaps because the relief granted by the Court of Appeal appears to be, to the Sahins, inadequate compensation. Were further examination of these questions permitted, resulting in a favourable outcome for the Sahins, the judgment delivered would be inconsistent with the Court of Appeal's judgment, leading to the conclusion that there should not be a second trial. The deceit claim, as I have explained, is in substance the same cause of action as the statutory cause of action on which judgment was based in the first proceeding.

41 The issue of damages has been conclusively determined. The Court of Appeal necessarily considered the suitability of an award of damages as the appropriate form of relief. The statutory power under s 87(2) to make such order as the court thinks appropriate against a person who has engaged in deceptive or misleading conduct is enlivened where the court finds that the plaintiff has suffered or is likely to suffer loss or damage by the defendant's conduct in contravention of the Act, and where the court considers that the order it proposes to make under s 87 will compensate the plaintiff in whole or in part for the loss or damage, or will prevent or reduce the loss and damage.

42 This is what has occurred in the first proceeding. The court considered that restitution of the parties to the position they were in before the wrongful conduct of NAB and NAFM was the form of judgment that would best compensate the Sahins. The entitlement of the Sahins to damages was recognised but, rather than award compensatory compensation, a statutory restitution order was made. The relief granted used the progressive remedies afforded by the Trade Practices Act.

43 Punitive damages are not a head of damages that can be awarded in isolation. The Court of Appeal recently stated in Carter v Walker,[23] the principles that govern the award of aggravated or exemplary damages:

Aggravated damages may be awarded where the defendant has acted, either in committing a tort or thereafter, with 'contumelious disregard' of the plaintiff's rights, in an insulting or high-handed way, or with malice. It is a key requirement that such conduct increased the plaintiff's suffering. The theory is that aggravated damages are compensatory.

Exemplary damages are damages over and above those necessary to compensate the plaintiff. They are awarded to punish the defendant. They are intended to act as a deterrent to the defendant, and to others minded to behave in a like manner. They are also intended to demonstrate the court's disapprobation and denunciation of such conduct. Such damages may be awarded in respect of any tort that is committed in circumstances involving a deliberate, intentional, or reckless disregard of the plaintiff's rights. Often, they are sought in cases involving allegations against the police of assault and battery.

The law allows for both aggravated and exemplary damages to be awarded in respect of the same tort. It is necessary, however, in such cases, to be wary of overcompensation. There is a risk in awarding both compensatory and punitive damages, arising out of exactly the same wrongdoing, that the plaintiff will receive an unwarranted windfall. That risk is accentuated by the recognition that, in reality, there can be a punitive element in aggravated damages.

The essential interrelation between compensatory and punitive damages requires that punitive damages must be considered by the court when assessing compensatory damages. There are no compensatory damages to be assessed in this case because of the restitutionary character of the judgment entered.

44 A further difficulty is that exemplary damages are not available under the Trade Practices Act.[24] There was no impediment to raising the deceit claim on appeal. An appeal ground could have been directed at the County Court's refusal of the application to amend, to add the deceit claim to the trial. Had they wished to pursue a claim to obtain punitive damages against NAB and NAFM, the Sahins needed to reject the offer of relief under s 87 of the Trade Practices Act and press for damages in tort instead. While it seems fanciful to expect that, by that road, the Sahins might have arrived at a better outcome, the fact is that it did not happen. The Sahins no longer have a claim for compensatory damages. They no longer have any claim for damages arising out of the conduct identified by the Court of Appeal as the basis for the relief granted in the first proceeding. There is an issue estoppel on the issue of damages.

45 This leads me to the final matter. I am satisfied that the claim for damages now being alleged is a claim that could and should have been raised and resolved in the first proceeding. If one accepts that an Anshun estoppel will not arise when the litigant was unable to raise the claim in the first proceeding,[25] and the circumstances of the refused amendment satisfy that requirement in favour of the Sahins, a matter which I cannot determine on the material before me, the exclusion of the Anshun estoppel can only extend to the original judgment in the County Court. The Court of Appeal was perfectly placed to consider, not only whether the deceit claim ought to have been allowed to be raised, but also whether damages in deceit would have provided a better outcome for the Sahins.

46 However, that the Sahins could have raised the claim or ground of appeal in the first proceeding is not sufficient to raise the estoppel. The test is 'based on the reasonableness ... of the conduct of a litigant in earlier proceedings'.[26] For the operation of the estoppel, the fact that the matter could have been raised before the Court of Appeal may not mean that it should have been raised. The 'unreasonableness' criterion involves evaluation of what the Sahins could reasonably have been expected to do in the first proceeding. In Anshun, Gibbs CJ, Mason and Aickin JJ stated:

There will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding.[27]

Although expressed in reference to the failure to raise a defence, the principle equally applies with respect to a claim. The question here is whether the claim was 'so relevant' to the earlier litigation that it was 'unreasonable' not to have raised it on the appeal.

47 This requires a court to consider all the circumstances having any bearing upon unreasonableness in the particular matter, not simply identifying common facts in, or subject matter of, both proceedings.[28] In Anshun, Gibbs CJ, Mason and Aickin JJ explained that there are a variety of circumstances in which a party may justifiably refrain from litigating an issue in one proceeding, yet wish to litigate the issue in other proceedings. Expense incurred, importance of the particular issue, motives extraneous to the actual litigation were all mentioned.[29] One significant circumstance bearing on 'unreasonableness' is the potential for the judgment in the later proceeding to conflict with the judgment in the earlier proceeding. In Anshun, Gibbs CJ, Mason and Aickin JJ explained:

By 'conflicting' judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that hey appear to declare rights which are inconsistent in respect to the same transaction.[30]

Thus, estoppel may apply where the subject matter of the second proceeding is so closely connected with the subject matter of the first proceeding that there may be an inconsistent determination of rights in respect to the same transaction, although there is no precise correspondence between the legal claims.

48 I am satisfied that permitting the counterclaim to proceed to trial, if it is not a fanciful claim, carries a real and appreciable risk of an inconsistent determination of rights about the conduct of NAB and NAFM in and about the circumstances of refinancing of the loan facility and the cancelling the credit insurance policy. It matters not that there is no precise correspondence between the legal bases of the claims in the proceedings, and I reject Mr Sahin's contention to that effect. Rather, given the close nexus between the torts of deceit and negligent misrepresentation and the statutory cause of action under the Trade Practices Act, evident from the history of consumer protection law in Australia, the controversy in a consumer deceit or negligent misrepresentation action, as a matter of substance, is often regarded as in substance the controversy in a s 52 claim. It is unusual to see a s 52 claim advanced in a proceeding without corresponding common law claims. I am satisfied it was, in the relevant sense, unreasonable of the Sahins not to raise their grievance that they were not permitted to pursue a deceit claim, or alternatively their claim to aggravated or exemplary damages, in the Court of Appeal.

49 The principles underlying estoppel by record are that it is for the common good that there should be an end to litigation and that no one should be harassed twice for the same cause. Each of those principles has clear application here. Accordingly, subject to any further submission as to the form of the order or costs, I will order that the appeal is dismissed with costs and the order of the associate justice made on 6 May 2011 is affirmed.

[1] [1981] HCA 45; (1981) 147 CLR 589.

[2] The following summary is drawn from the reasons for judgment of Hargrave AJA in the appeal. Sahin v National Australia Bank Ltd & Anor [2011] VSCA 64 (8 March 2011).

[3] In breach of s 144 of the Consumer Credit (Victoria) Code, alternatively in breach of s 52 of the Trade Practices Act 1974 (Cth) and/or s 9 of the Fair Trading Act 1999 (Vic).

[4] Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118, 130 [22], 132 [25]-[26].

[5] [2011] VSC 222 (27 May 2011).

[6] [2010] VSC 84 (22 March 2010) 7 [20].

[7] See also Dallal v Bank Mellat [1986] QB 441, 451-452; cited with approval in Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502, 511.

[8] Relying on an observation of Powell JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, 619.

[9] Tedeschi v Legal Services Commissioner (1997) 43 NSWLR 20. Whether that is so with Anshun estoppel appears controversial. See Solak v Registrar of Titles [2011] VSCA 279 (16 September 2011). That issue does not arise on this application.

[10] Commissioner for Railways (NSW) v Cavanough [1935] HCA 45; (1935) 53 CLR 220.

[11] Gray v Dalgety & Co Ltd [1916] HCA 35; (1916) 21 CLR 509, 520-1; Wishart v Fraser [1941] HCA 8; (1941) 64 CLR 470; R v Marks; Ex parte Australian Building Construction Employees and Builders Labourers' Federation [1981] HCA 33; (1981) 147 CLR 471, 476.

[12] Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502, 508.

[13] Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245, 263-264 [106]-[108].

[14] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, 610 (Brennan J).

[15] [2010] VSC 84 (22 March 2010) 8 [23].

[16] Citing Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406, 418; Murphy v Abi-Saab (1995) 37 NSWLR 280; S635 of 2003 v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCAFC 65 (22 April 2005).

[17] Sahin v National Australia Bank Ltd [2011] VSCA 64 (8 March 2011) [65]-[73].

[19] It may be open to doubt whether the Court of Appeal would have re-examined the evidence as it did had Mr and Mrs Sahin persuaded the Court that the County Court erred in refusing the amendment to include a claim of deceit in order that the Sahins might pursue a claim for exemplary damages.

[20] Sahin v National Australia Bank Ltd [2011] VSCA 64 (8 March 2011) [65]-[72].

[22] It may be that Mr and Mrs Sahin also had in mind loss of a type properly characterised as aggravated damages or damages for mental distress, but what I am about to say applies nonetheless.

[23] [2010] VSCA 340 (14 December 2010) [283]-[285].

[24] Musca v Astle Corporation Pty Ltd [1988] FCA 4; (1988) 80 ALR 251 (20 January 1988); Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 58 FCR 274; Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494.

[25] See Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, 619 (Powell JA); Spassked Pty Ltd v Commissioner of Taxation [2007] FCAFC 205; (2007) 165 FCR 484.

[26] Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 434 (23 December 2009) [60]; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245, 252 [39].

[27] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, 602.

[28] Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245, 255 [52].

[29] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, 603.