Plaintiffs v Defendant

2 Clause 14 of the Contract was in the following terms:

14. Loan

14.1 If the particulars of sale specify that this contract is subject to a loan being approved, this contract is subject to the lender approving the loan on the security of the property by the approval date or any later date allowed by the vendor.

14.2 The purchaser may end the contract if the loan is not approved by the approval date, but only if the purchaser:

(a) immediately applied for the loan; and

(b) did everything reasonably required to obtain approval of the loan; and

(c) serves written notice ending the contract on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor; and

(d) is not in default under any other condition of this contract when the notice is given.

14.3 All money must be immediately refunded to the purchaser if the contract is ended.

3 The particulars of sale of the Contract specified that it was subject to a loan being approved as follows:

LOAN (general condition 14)

The following details apply if this contract is subject to a loan being approved.

Lender: AFG Home Loans

Loan amount: $475,000 Approval date: 4/6/2013

4 After the Contract was signed, the defendant agreed to extend the approval date for the proposed loan from 4 June 2013 to 14 June 2013.

5 The principal relief sought in the writ is '[a] declaration that the contract ended upon service of the notice under General Condition 14.2(c)' and '[a]n order that the defendant refund the deposit by paying to the plaintiff the sum of $59,500.'

6 By summons, the defendant has applied for summary judgment pursuant to s 63 of the Civil Procedure Act 2010 and r 23.03 of the Supreme Court (General Civil Procedure) Rules 2005 ('Rules') or, alternatively, under r 23.01(1)(c). The defendant relies upon three grounds: res judicata, issue estoppel and abuse of process. All the grounds are based on a decision made by Williams J on 22 August 2013,[1] in which her Honour dismissed a proceeding commenced by the plaintiffs on 25 June 2013 against the defendant ('previous proceeding') by way of originating motion under s 49 of the Property Law Act 1958 ('PL Act').

7 In the previous proceeding, the plaintiffs sought the following principal relief:

Pursuant to section 49 of the Property Law Act 1958, that the defendant be ordered to repay the plaintiffs the sum of $59,500 pursuant to general condition 14.3 of the contract of sale of real estate made between the parties dated 27 May 2013, as amended.

8 In the previous proceeding, the plaintiffs relied on a very short affidavit sworn by the second plaintiff in which she exhibited an ASIC search of the defendant, extracts from the Contract, an application to AFG Home Loans for a loan of $476,000, correspondence between the parties' solicitors, and a letter dated 13 June 2013 from AFG Home Loans to the plaintiff's finance broker. That letter stated that the loan application had been declined for the following reason: 'Valuation confirms the property is unacceptable for AFG to consider.'

9 Williams J made an order dismissing the plaintiffs' application under s 49 of the PL Act for the following reasons:

I am not persuaded by the limited evidence before the Court that the plaintiffs have satisfied the stipulated pre-conditions for their entitlement to end the contract under general condition 14.2, triggering the defendant's obligation to refund the deposit under general condition 14.3.

First of all, there is insufficient evidence to persuade me that the plaintiffs applied for a loan of the amount of $475,000 specified in the contract.

Even if that is not correct and the plaintiffs should, logically, be regarded as having applied for a loan of $475,000 by asking for the higher amount, I am not satisfied by the evidence that they would have fulfilled their obligation under general condition 14.2(b) to do everything reasonably required to obtain approval of such a loan.

There is insufficient evidence of any dealings between the plaintiffs and AFG Home Loans to indicate what the prospective lender did require and what was done by the plaintiffs to satisfy those requirements. Such correspondence as is exhibited to Ms Walker's affidavit suggests that there were requirements by the lender, but does not show how or when there were relevant issues or how or when the plaintiffs attempted to address them. The succinct statement of the reason for the refusal of the loan does not assist, raising as it does questions as to what was meant by saying that the valuation indicated that the property was 'unacceptable for AFG to consider'. There was no evidence as to the nature or content of any valuation.

It follows that I am not satisfied, on the basis of the only material before the Court, that the plaintiffs fulfilled the pre-conditions for the termination of the contract, even if their solicitors' letter of 14 June 2013 (sent on, rather than after the approval date) would have conveyed that they were electing to end it. As a result, they have not persuaded me that they are entitled to the refund of the deposit under general condition 14.3.

Nor am I persuaded by the limited material before me that this would, nevertheless, be an appropriate case for the exercise of the Court's discretion under s 49(2) of the Property Law Act, even if the subsection were applicable when the deposit remains with the defendant's agent and has not been forfeited.

The discretion under s 49(2) allows the Court to do justice between the parties. Gillard J in Poort v Development Underwriting (Victoria) Pty Ltd (No 2) held that exceptional circumstances must be shown to justify such an outcome where the contract provides for the forfeiture of the deposit and the purchaser must establish that an innocent party would not be hurt by the exercise of the discretion. There is no evidence of any circumstances which would justify the description 'exceptional' or, indeed, indicate that fairness demands that the deposit be refunded to do justice between the parties in this case. I note, in this regard, in particular, the absence of evidence as to the dealings between the plaintiffs and AFG Home Loans. Further, there is no evidence to indicate that the defendant would not be an innocent entity affected adversely by such a determination, in all the circumstances.

The application should be refused.[2]

10 The plaintiffs did not appeal against Williams J's decision.

11 For the reasons that follow, I have concluded that this proceeding is an abuse of process and that it should be permanently stayed pursuant to r 23.01(1) of the Rules.

12 I will first consider abuse of process because it is wider in scope than res judicata and issue estoppel. This is because a proceeding which seeks to re-agitate matters dealt with in a prior judicial decision may constitute an abuse of process even if the principles of res judicata and issue estoppel do not apply.[3]

13 In State Bank of New South Wales Ltd v Stenhouse Ltd,[4] Giles CJ stated that the 'guiding considerations' in determining whether re-litigation of an issue in a subsequent proceeding constitutes an abuse of process are 'oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice'.[5] His Honour listed the following non-exhaustive factors to which regard may be had:

(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; all part of -

(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.[6]

14 The factors listed in the above passage provide a convenient framework for a consideration of whether this proceeding constitutes an abuse of process.

15 In relation to factor (a), the factual issue of whether the plaintiffs complied with their obligations under cl 14.2 of the Contract ('Factual Issue') and the ultimate issue of whether they are entitled to a refund of the deposit of $59,500 pursuant to cl 14.3 ('Ultimate Issue') are of central importance in this proceeding, as they were in the previous proceeding.[7]

16 In relation to factor (b), the plaintiffs had ample opportunity to fully litigate the Factual Issue and the Ultimate Issue (collectively 'Issues'). It was their decision to initially litigate the Issues under s 49 of the PL Act and they had full control over the evidence to be adduced by them before Williams J. They chose to adopt a minimalist approach to the evidence upon which they relied. In this connection, on 15 July 2013 the solicitors for the defendant requested further documentary evidence from the plaintiffs' solicitors to enable the defendant to determine whether the plaintiffs had complied with their obligations under the Contract, but the plaintiffs' solicitors declined to provide any further information. Indeed, the plaintiffs' solicitors described the request for further documents as 'a mere fishing expedition' and confidently asserted that the evidence upon which the plaintiffs relied was sufficient for the making of the orders sought by them.

17 In relation to factor (c), the Ultimate Issue that Williams J was required to decide in the previous proceeding involved resolution of the Factual Issue, including whether the plaintiffs applied for a loan in the amount of $475,000 'immediately' and whether they 'did everything reasonably required to obtain approval of the loan'. Her Honour decided that the plaintiffs did not adduce sufficient evidence to satisfy her that they had immediately applied for a loan in the amount of $475,000 and that they had done everything reasonably required to obtain approval of that loan. By making the above findings and dismissing the plaintiffs' application, Williams J necessarily decided that the plaintiffs were not entitled to a refund of the deposit of $59,500 pursuant to cl 14.3 of the Contract.

18 Although the procedure in s 49 of the PL Act may be described as a summary procedure, the question of whether a decision is final depends not on the form in which an issue comes before the Court, but on the legal effect of the judicial decision. In Kuligowski v Metrobus,[8] the High Court held that a 'final' decision is one which is not of an 'interlocutory character', but is completely effective unless and until rescinded, altered or amended.[9] The fact that an appeal lies from a decision does not make it any less final.[10] In my opinion, in the absence of any variation or setting aside on appeal, Williams J's decision is completely effective in determining that the plaintiffs are not entitled to a refund of the deposit of $59,500 pursuant to cl 14.3 of the Contract. Accordingly, it is a final decision.

19 In relation to factor (d), in this proceeding, the plaintiffs seek the same substantive relief that they sought in the previous proceeding, namely, a refund of the deposit of $59,500 pursuant to cl 14.3 of the Contract. That issue has already been decided against them in the previous proceeding. The fact that the previous proceeding was commenced by a succinct originating motion whereas this proceeding was commenced by a writ accompanied by a detailed statement of claim is immaterial.

20 In relation to factor (e), in this proceeding, the plaintiffs have not sought to rely on any evidence that was not in their possession at the time of the hearing of the previous proceeding. Rather, they have sought to rely on evidence - such as the valuation of the property in the amount of $510,000 - which they previously had in their possession but consciously decided not to adduce at the hearing of the previous proceeding.

21 In relation to factor (f), if the plaintiffs are permitted to re-litigate the Ultimate Issue, the defendant would be at risk of an adverse decision. The principle of finality in judicial determination would be undermined because the plaintiffs would be permitted to pursue a legal remedy for a second time, having failed on the first occasion due to forensic decisions made by them.

22 In my opinion, public confidence in the system of the administration of justice would be eroded if litigants were permitted to bring multiple proceedings over the same issues. It is in the public interest for litigants to fully and effectively litigate issues only once, subject to any available avenues of appeal or judicial review, rather than being able to treat an initial proceeding as a 'practice run', to be improved in subsequent proceedings based on the lessons learnt in the initial proceeding.

23 In relation to factor (g), the plaintiffs' written submissions relied on the following 'special circumstances':

(a) The previous proceeding involved a procedure which was summary in nature and consequently the evidence before Williams J was very limited.

(b) Not all evidence relevant to the Issues was before Williams J.

(c) Williams J's decision was not a determination following pleadings, discovery and a trial with oral evidence and cross-examination.

(d) The procedure in the previous proceeding was analogous to a summary judgment application and Williams J could have ordered that the proceeding continue as a cause with pleadings and the usual interlocutory steps.

(e) If the plaintiffs are not permitted to pursue this proceeding, they would suffer an injustice because they would not be able to have their 'strong case' for a refund of the deposit determined on its merits. On the other hand, the defendant would not suffer prejudice if this proceeding continued because the evidence in the previous proceeding was limited and the plaintiffs were ordered to pay the defendant's costs.

(f) There is little, if any, risk of a judge making a decision in this proceeding which is inconsistent with Williams J's decision due to the 'non-satisfaction' nature of that decision.

24 Most of the above matters are the consequences of the forensic decisions that the plaintiffs made in relation to the previous proceeding and all of them fail to give any weight to the fact that abuse of process does not simply involve a balancing of the parties' circumstances but also the strong public interest in finality in litigation.

25 The power to permanently stay a proceeding as an abuse of process is to be exercised sparingly and upon examination of the relevant circumstances of the particular case.[11] In the present case, a consideration of all the circumstances and an overall balancing of justice as between the parties overwhelmingly supports the conclusion that this proceeding constitutes an abuse of process that is serious enough to warrant an order that the proceeding be permanently stayed.

26 In the light of my conclusion at [25] above, it is strictly unnecessary for me to decide whether the principles of res judicata and issue estoppel apply. I will, however, make some brief observations on those principles.

27 The principle of res judicata can be invoked in a current proceeding in respect of a decision in a prior judicial proceeding where:

(a) the cause of action which is sought to be agitated in the current proceeding was decided in the prior judicial proceeding;

(b) the decision in the prior judicial proceeding was final; and

(c) both proceedings involve the same parties or their privies.[12]

28 The principle of issue estoppel can be invoked in a current proceeding in respect of a decision in a prior judicial proceeding where:

(a) an issue of fact or law which is sought to be agitated in the current proceeding was decided in the prior judicial proceeding and it established the legal foundation or justification for the decision on the cause of action in the prior proceeding;

(b) the decision in the prior judicial proceeding was final; and

(c) both proceedings involve the same parties or their privies.[13]

29 In respect of both res judicata and issue estoppel, the plaintiffs submitted that Williams J's decision did not decide adversely to them any factual matter which arises in this proceeding because her Honour, in effect, was unable to make relevant findings of fact due to the state of the plaintiffs' evidence. The plaintiffs also submitted that Williams J's decision was not final because the procedure in s 49 of the PL Act is a summary procedure.

30 The plaintiffs' first submission involves the proposition that a judge who dismisses a proceeding on the basis that the plaintiff has not discharged his or her onus of proof in relation to the relevant cause of action, without making any positive findings about the absence of the elements of that cause of action, does not make a decision that engages the principle of res judicata. Thus, according to the plaintiffs, while a decision that a contract did not come into existence could attract the principle of res judicata, a decision that the plaintiff has not discharged his or her onus of establishing the existence of a contract, would not attract that principle.

31 In support of this submission, the plaintiffs relied on the following statements in Kuligowski:

In general, disbelief in a witness's evidence does not establish the contrary. Similarly, disbelief in the case presented by the moving party does not necessarily permit the court to conclude that the positive case of the opposing party is correct. In particular cases it may not be possible to reach a conclusion either way:

[T]he judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden.

A failure to find a matter alleged does not establish the truth of the contrary of that which is alleged. There are many general statements about the operation of issue estoppel, approved in this Court, which require more than non-satisfaction to establish an estoppel in later proceedings.

For example, in Jackson v Goldsmith, Williams J approved a passage from Halsbury's Laws of England including the following:

A party is precluded from contending the contrary of any precise point which, having been once distinctly put in issue, has been solemnly found against him.

Much here turns upon what is involved in the phrase 'solemnly found'. The form of the first proceeding, particularly the issues joined or admitted on any pleadings, will be important. In Hoysted v Federal Commissioner of Taxation, Higgins J said:

A point or an issue may be actually controverted, may be in actual controversy, in actual litigation, although it is not argued, or argued properly. A point may be in controversy although counsel may address no arguments to it, or may overlook certain aspects.

An issue admitted on pleadings or other formal process or otherwise conceded at a hearing may, from the nature of the outcome, necessarily have been decided. But what of other questions arising in the first proceeding? In Blair v Curran, Dixon J observed that a 'judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue'. His Honour went on to distinguish findings concerning only 'evidentiary facts' not the 'ultimate facts' which formed the very title to rights in dispute. This analysis, with the emphasis on decision-making, would require more than non-satisfaction.[14]

32 The plaintiffs also submitted that the relief sought in the previous proceeding was akin to a declaration and relied on Brinds Ltd v Chapmans Ltd[15] for the proposition that the refusal of declaratory relief does not finally determine the rights of the parties and therefore does not establish a res judicata.

33 It was common ground between the parties that the third component of the principles of res judicata and issue estoppel - that this proceeding and the previous proceeding involve the same parties - was satisfied.

34 At [18] above, I concluded that Williams J's decision was final. Principles relating to declarations are irrelevant because the plaintiff did not seek a declaration in the previous proceeding. Accordingly, the second component of the principles of res judicata and issue estoppel is satisfied.

35 The first component of the principles of res judicata and issue estoppel is problematic due to the observations of the High Court in Kuligowski. In the light of the discussion at [17] above, it is arguable that the first component is satisfied. As I have said, however, it is not necessary for me to reach a final view on this matter.

36 For the above reasons, I will make an order permanently staying this proceeding.

37 In its summons, the defendant also sought an order restraining the plaintiffs from commencing any further proceedings against the defendant 'arising out of or relating to the [Contract]'. In my opinion, such an order would be too wide and, in any event, it would not be necessary in relation to the issues already dealt with by Williams J in the previous proceeding. This is because I am confident that no competent lawyer cognisant of his or her obligations under the CP Act would commence a proceeding on behalf of the plaintiffs which sought to re-litigate those issues. It would not be appropriate to make any orders in relation to any causes of action that the plaintiffs may have against the defendant in relation to the sale of the property or otherwise which were not dealt with by Williams J in the previous proceeding.[16]

38 The plaintiffs submitted that if I found against them on any of the grounds upon which the defendant relied, I should strike out the statement of claim and give them leave to re-plead rather than dismissing the proceeding or entering judgment for the defendant. The plaintiffs' description of the alternative causes of action that they might re-plead was vague and unhelpful. Accordingly, the most appropriate course to remedy the abuse of process is an order that brings the proceeding to an end by permanently staying it. Such an order would not preclude the plaintiffs from commencing a new proceeding which relies on causes of action which were not dealt with by Williams J in the previous proceeding. Whether such a new proceeding would constitute an abuse of process will depend on a consideration of all the relevant circumstances, including the factors set out at [13] above.

39 I will hear from the parties on the question of costs.

[1] Putt v Perfect Builders Pty Ltd [2013] VSC 442 (22 August 2013) ('Williams J's decision').

[2] Williams J's decision, [21]-[28] (citations omitted).

[3] Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198, 201-2 [15]-[16].

[4] (1997) Aust Torts Reports 81-423 ('Stenhouse').

[5] Stenhouse (1997) Aust Torts Reports 81-423, 64, 089.

[6] Stenhouse (1997) Aust Torts Reports 81-423, 64, 089.

[7] Although in this proceeding the refund of the deposit is not stated to be sought pursuant to cl 14.3 of the Contract, no other legal basis is pleaded.

[8] [2004] HCA 34; (2004) 220 CLR 363 ('Kuligowski').

[9] Kuligowski [2004] HCA 34; (2004) 220 CLR 363, 375 [25], 377 [32].

[10] Kuligowski [2004] HCA 34; (2004) 220 CLR 363, 375 [25].

[11] Spalla v St George Motor Finance Ltd [No 6] [2004] FCA 1699 (20 December 2004) [70].

[12] See, eg, Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, 531-2; Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446, 466-7.

[13] Forster v Legal Services Board [2013] VSCA 73 (11 April 2013) [100]-[105].

[14] Kuligowski [2004] HCA 34; (2004) 220 CLR 363, 385-6 [60]-[62] (citations omitted).

[15] (1985) 10 ACLR 97.

[16] Velissaris v Dynami Pty Ltd [2013] VSCA 299 (24 October 2013) [2], [82], [139]-[146].