Poulos v Elliott

Background

1. I do not propose to recite the origins of the dispute between the Bank, Hacide and the Poulos family. Those matters are available to anyone who cares to read the Sully J Judgment.
2. It is sufficient that I note that his Honour identified the three defences which were the substance of what his Honour had to deal with in circumstances where the Bank had made out a prima facie entitlement to possession of No 52. At paragraph [1.12] his Honour said: "The defendants sought to meet that prima facie case by asserting: 1.12.1 That the Bank had been guilty of fraud in connection with the subject mortgage. 1.12.2 That the Bank and the defendants had never been ad idem as to the purpose of the subject mortgage. 1.12.3 That the Bank in connection with the taking of the subject mortgage, had been knowingly party to a breach of trust such as to preclude the Bank from enforcing the subject mortgage according to its apparent tenor."
3. One of the most important matters which Sully J had to contend with was what his Honour described (at paragraph [2.6]) as Mrs Poulos' "single-minded determination" that no money had ever been advanced by the Bank to Hacide so that there was no reason for Hacide to have given a mortgage over No 52, and that she had no doubt that there was no such mortgage.
4. Mrs Poulos' evidence to the effect which I have just recited was comprehensively rejected by Sully J.
5. By the time the matter came before the Court of Appeal the issues were considerably narrowed. The CA Judgment was delivered by Priestley JA, with whom Samuels and Clarke JJA agreed. Given the passage of time since the Sully J Judgment and the CA Judgment, the extremely detailed analysis of the facts which appears in the judgment of Priestley JA has assumed considerable importance for the purpose of today's argument.
6. However, for present purposes I note that the issue before the Court of Appeal was described by Priestley JA (at 10-11): "For instance, in light of the trial judge's findings based on credibility, which the appellant's counsel (rightly I think) felt he could not challenge, and the indisputable fact that the Bank made $360,000 available at Mrs P's directions, on the security, as her solicitor wrote to her on 6 May 1985, of [No 52], appellant's counsel was constrained to agree that the Bank was entitled to possession of the Certificate of Title to [No 52] at least as security for an equitable mortgage over the land for the amount advanced. Thus the argument on appeal came to the narrow question whether the Bank, although entitled to a mortgage of the land in equity, was not entitled to remain the registered mortgagee of it, because the registered document had not been filled in by the authority of the mortgagor. A full drawing out of the implications of the appellant's recognition of the position in equity would I think reveal great difficulties in the appellant's presenting any intelligible version of the facts in the appeal.
7. In terms of considering the proceedings which Mrs Poulos has now brought, I should also note Priestley JA's reference to "the indisputable fact that the bank made $360,000 available at Mrs P's directions" is significant. This is because in these proceedings and before me today, Mrs Poulos demonstrated the same "single-minded determination" identified by Sully J. She vigorously maintained that there had been no advance and no basis on which the Bank could have a mortgage over No 52 pursuant to which it would have been entitled to the order for possession.
8. The relief which Mrs Poulos seeks in these proceedings by her statement of claim (and to the same effect by the proposed amended statement of claim) is: "1. IMPEACHMENT OF JUDGMENT OF NEEDHAM J. on the grounds of fraud. ORDERS to set aside the Judgment of Needham J. of 8 December 1998. Relief sought: Return of payment of monies in satisfaction of that Judgment being approx. $2.2m, costs and any or other orders the Court deems fit. 2. IMEACHMENT OF JUDGMENT OF SULLY J. on the grounds of fraud. ORDERS to set aside the Judgment of Sully J. of 28 November 1989. Relief sought: (i) Reinstatement of the Plaintiff in the property from which the Plaintiff was evicted at 52 Taloombie Street, South Cronulla and (ii) transfer of Certificate of Title to Plaintiff, costs, and any, or other orders Court deems fit. 3. ORDERS To NSW Police to re-open criminal investigations abandoned on receipt of false evidence, to include matters referred to herein, and any, or other orders the Court deems fit. 4. Referral to the Law Society of NSW for reconsideration. 5. Referral to the NSW Bar Association for reconsideration."
9. Order 3, 4 and 5 sought by Mrs Poulos in the statement of claim are orders which the Court would not make. Insofar as Order 1 is concerned, that has not been the subject of argument before me today. The argument has been directed to Order 2 seeking to impeach the Sully J Judgment on the ground of fraud.

Consideration

1. Before coming to the question of the Sully J Judgment having been obtained by fraud, Ms Roughley on behalf of the Bank has, as one might expect, deployed the principles of res judicata and issue estoppel in the face of the statement of claim and the amended statement of claim. Those principles are well-known. At their heart is the fundamental principle of the law in favour of finality. Putting it broadly, it will be an abuse of process where, without good reason, a party seeks to relitigate matters which have been the subject of an earlier judgment. One of those good reasons is where a party can demonstrate that the judgment has been procured by fraud.
2. Ms Roughley provided the Court with an extensive table which is included in the Court book. I will direct that the Court book should remain with the papers. That table sets out in exquisite detail the allegations in the statement of claim and proposed statement of claim and compares them with the matters decided in the Sully J Judgment and the CA Judgment. That comparison demonstrates beyond any reasonable doubt that Mrs Poulos is seeking to relitigate the matters that were the subject of final determination in the Sully J Judgment as upheld by the CA Judgment. I invited Mrs Poulos to identify to the Court any error or omission in the table that had been prepared by Ms Roughley. Mrs Poulos was unable to do so.
3. Accordingly, the real question for determination was whether Mrs Poulos was able to demonstrate any basis on which it could be said that the Sully J Judgment had been obtained by fraud. The statement of claim and the proposed amended statement of claim are not easy to follow. The question of alleged fraud was dealt with before me in an appropriate and practical way by Ms Roughley inviting Mrs Poulos to identify what documents she would propose to rely upon that would answer the description of "new evidence" by reference to which it could be argued, on any basis, that the Sully J Judgment had been obtained by fraud.
4. The importance of proceeding in this way becomes apparent when the legal principles in relation to setting aside a judgment on the ground of fraud are considered. These are conveniently summarised in the judgment of the Court of Appeal in Wentworth v Rogers (No 5) (1986) 6 NSWLR 535. In the judgment of Kirby P (as his Honour then was) (Hope and Samuels JJA agreeing), his Honour said (at 538-539): "It is useful to state a number of principles which are established by law and which govern proceedings of the kind which the appellant wishes to bring. First, the essence of the action is fraud. As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] AC 298 at 301; McHarg v Woods Radio Pty Ltd (at 497). Secondly, it must be shown, by the party asserting that a judgment was procured by fraud, that there has been a new discovery of something material, in the sense that fresh facts have been found which, by themselves or in combination with previously known facts, would provide a reason for setting aside the judgment: see Lord Selborne LC in Boswell v Coaks (No 2) (1894) 6 R 167 at 170, 174; 86 LT 365 at 366, 368; Cabassi v Vila (1940) 64 CLR 130 at 147; McDonald v McDonald (1965) 113 CLR 529 at 533; Everett v Ribbands (1946) 175 LT 143 at 145, 146; Birch v Birch [1902] P 130 at 136, 137-138; Ronald v Harper [1913] VLR 311 at 318. This rule has an ancient lineage: see, eg, Shedden v Patrick (1854) 1 Macq 535 at 615, 622; Halsbury's Laws of England, 4th ed, vol 26, par 560 at 285. It is based upon a number of grounds. There is a public interest in finality of litigation. Parties ought not, by proceeding to impugn a judgment, to be permitted to relitigate matters which were the subject of the earlier proceedings which gave rise to the judgment. Especially should they not be so permitted, if they move on nothing more than the evidence upon which they have previously failed. If they have evidence of fraud which may taint a judgment of the courts, they should not collude in such a consequence by refraining from raising their objection at the trial, thereby keeping the complaint in reserve. It is their responsibility to ensure that the taint of fraud is avoided and the integrity of the court's process preserved. Thirdly, mere suspicion of fraud, raised by fresh facts later discovered, will not be sufficient to secure relief: Birch v Birch (at 136, 139); McHarg v Woods Radio Pty Ltd (at 498); Ronald v Harper (at 318). The claimant must establish that the new facts are so evidenced and so material that it is reasonably probable that the action will succeed. This rule is founded squarely in the public interest in finality of public litigation and in upholding judgments duly entered at the termination of proceedings in the courts. Fourthly, although perjury by the successful party or a witness or witnesses may, if later discovered, warrant the setting aside of a judgment on the ground that it was procured by fraud, and although there may be exceptional cases where such proof of perjury could suffice, without more, to warrant relief of this kind, the mere allegation, or even the proof, of perjury will not normally be sufficient to attract such drastic and exceptional relief as the setting aside of a judgment: Cabassi v Vila (at 147, 148); Baker v Wadsworth (1898) 67 LJQB 301; Everett v Ribbands (at 145, 146). The other requirements must be fulfilled. In hard fought litigation, it is not at all uncommon for there to be a conflict of testimony which has to be resolved by a judge or jury. In many cases of contradictory evidence, one party must be mistaken. He or she may even be deceiving the court. The unsuccessful party in the litigation will often consider that failure in the litigation has been procured by false evidence on the part of the opponent and the witnesses called by the opponent. If every case in which such an opinion was held gave rise to proceedings of this kind, the courts would be even more burdened with the review of first instance decisions than they are. For this reason, and in defence of finality of judgments, a more stringent requirement than alleged perjury alone is required. Fifthly, it must be shown by admissible evidence that the successful party was responsible for the fraud which taints the judgment under challenge. The evidence in support of the charge ought to be extrinsic: cf Perry v Meddowcroft (1846) 10 Beav 122 at 136-139; 50 ER 529 at 534, 535. It is not sufficient to show that an agent of the successful party was convicted of giving perjured evidence in the former proceeding, the result of which it is sought to impeach. It must be shown that the agent, in so acting, was in concert with the party who derived the benefit of the judgment: Ronald v Harper (at 318); Shedden v Patrick (at 643). Sixthly, the burden of establishing the components necessary to warrant the drastic step of setting aside a judgment, allegedly affected by fraud or other relevant taint, lies on the party impugning the judgment. It is for that party to establish the fraud and to do so clearly. In summary, he or she must establish that the case is based on newly discovered facts; that the facts are material and such as to make it reasonably probable that the case will succeed; that they go beyond mere allegations of perjury on the part of witnesses at the trial; and that the opposing party who took advantage of the judgment is shown, by admissible evidence, to have been responsible for the fraud in such a way as to render it inequitable that such party should take the benefit of the judgment."
5. Today's task focussed on what Kirby P set out as the second of the relevant principles, namely that it must be shown by the party asserting the judgment was procured by fraud, that there has been a new discovery of something material, in the sense that fresh facts have been found which, by themselves or in combination with previously known facts, would provide a reason for setting aside the judgment.
6. Mrs Poulos identified six documents which she said were the basis on which she wished to contend that the Sully J Judgment had been obtained by fraud.
7. A fundamental difficulty for Mrs Poulos in relation to three of those documents is that she readily accepted that they were documents that were available to and known to her at the time of the hearing before Sully J. Those documents are a letter of 4 April 1984 from Elders Finance & Investment Co Pty Limited to the directors of Jensu Pty Limited (a Poulos family company), a letter dated 10 September 1984 from Elders Finance & Investment Co Limited to the directors of Glenwood Investments Pty Limited, and a letter from Lawrence & Lawrence Solicitors addressed to Mr and Mrs Poulos dated 4 December 1984.
8. It was not readily apparent to me how any of the information contained in those three letters could support the proposition that the Bank had withheld something or misled the Court about something so as to suggest that the Bank had obtained its order for possession of No 52 on the basis of fraud. Furthermore, those three letters cannot constitute evidence of the kind referred to by Kirby P because they could not answer the description of being a "new discovery of … fresh facts". It is therefore not necessary for me to consider those documents any further.
9. The next document was a discharge of mortgage where the mortgagee was the Australian and New Zealand Banking Group Limited and the mortgagor was Hacide. The mortgaged property was No 52. While dated 15 August 1984, it is clear on the face of that document that it was registered by the Bank on 23 May 1985. Mrs Poulos suggested that the difference between the date of the discharge of mortgage (15 August 1984) and the date of its registration (23 May 1985) was a cause for suspicion as to the circumstances in which the Bank obtained the Certificate of Title for No 52. Mrs Poulos submitted that the discharge of mortgage would demonstrate, or would give rise to an inference that, the Bank in fact had the Certificate of Title for No 52 well before the date on which funds were allegedly advanced by the Bank against the security of No 52.
10. Taking Mrs Poulos' proposition at face value, I am unable to see how the Court could be satisfied to the very high standard that would be necessary for the discharge of mortgage to establish that for which Mrs Poulos contended or that, even if it did, that it was an indicium of fraud.
11. Furthermore, Ms Roughley drew the Court's attention to this passage in the judgment of Priestley JA in the CA Judgment (at 10), "As the Bank came away from the settlement with the Certificate of Title to No 52, both the first and second mortgagees must have been paid out at the settlement. Discharges of the mortgages were registered on 23 May 1985 (Exhibit A, AB640)". There is no doubt that the discharge of mortgage related to No 52 and I accept Ms Roughley's submission that the Court should infer, as I do, from what appears in Priestley JA's judgment that the discharge of mortgage on which Mrs Poulos now relies was before both Sully J and the Court of Appeal. For this reason that document cannot meet the description of being a "new discovery of … fresh facts".
12. The next document relied upon by Mrs Poulos was another discharge of mortgage for another property also dated 15 August 1984 where the mortgagee was the Australian and New Zealand Banking Group Limited and Mr and Mrs Poulos are described as the mortgagors. It is clear from the discharge of mortgage that has been provided to the Court that it also was registered on 23 May 1985, although lodged by Mr and Mrs Poulos' own solicitors rather than by the Bank. Mrs Poulos was unable to offer any explanation that I was able to follow as to how this second discharge of mortgage would demonstrate even the beginning of a case that the Bank had obtained the order for possession of No 52 by fraud.
13. The final document is a letter dated 3 May 1993 from Lincoln Smith & Company, Solicitors to the Professional Standards Department of the Law Society of New South Wales. It is headed, "re Mrs P Poulos" and I infer that it is a response to what would now be referred to as a professional standards complaint by Mrs Poulos. Mrs Poulos said that the letter demonstrated that a loan had been made at the direction of Elders Landsworth Finance Limited to Glenwood Investments Pty Limited in Hong Kong. Again, I am unable to understand why that fact opens the door to the case of fraud that she wishes to make in the present proceedings.
14. The letter does indeed demonstrate what she asserts because it says in terms "on my instructions, and it was found by the Court as a fact in the proceedings, the loan was made to Glenwood Investments Pty Limited in Hong Kong at the direction of Elders Landsworth Finance Limited in Sydney. No documents were prepared to the contrary." I am unable to see how it sheds any light on the position of the Bank. It may say something about the case which Mrs Poulos wishes to bring against the first defendant, but I am not concerned with that today.
15. The Court therefore finds that none of the documents which Mrs Poulos has identified as being the documents upon which she would rely to evidence a "new discovery of … fresh facts" to make out a case of fraud in fact answered that description.
16. It follows that because Mrs Poulos has failed to demonstrate any proper basis to seek to have the Sully J Judgment set aside as having been procured by fraud, and where otherwise both the statement of claim and the proposed amended statement of claim raise precisely the issues which were the subject of the earlier proceedings, the statement of claim must be struck out as an abuse of process and leave to file the amended statement of claim refused as against the Bank.
17. Mrs Poulos' motion to strike out the Bank's notice of motion and for summary judgment against the Bank must also fail. For the sake of the orderly conduct of the proceedings I will also dismiss her notices of motion insofar as they relate to the first defendant. However, I should make it clear that nothing in the orders I will pronounce is intended to prevent Mrs Poulos applying by separate notice of motion for leave to amend her statement of claim against the first defendant or to apply for summary judgment against him. Not least because the first defendant has not been served and has not been represented today, nothing in these reasons affects whatever rights Mrs Poulos may have against the first defendant.

Costs

1. The Bank has sought its costs of the three notices of motion on the indemnity basis. Costs on that basis were sought in its notice of motion.
2. By letter dated 12 March 2019 the Bank's solicitors wrote to Mrs Poulos making, in a slightly more summary form than was presented to me today, the very same points which have persuaded the Court that the Bank is entitled to the relief which it seeks. There can be no doubt that the Bank's letter put Mrs Poulos on notice of the contentions that the Bank would be making today. The letter concludes: "In the circumstances described above, it is readily apparent that your claim has no reasonable prospects of success and that the claims you have brought are liable to be dismissed summarily with orders for costs in favour of our client, should such an application be filed. In particular, it is clear that, in the circumstances of your claim, the Limitations of Actions Act provides a complete defence for CBA. Further, even if this were not the case, your claims would be estopped entirely on grounds of res judicata. It is incumbent on the parties to seek to give effect to the overriding purpose of the Civil Procedure Act 2005 (NSW), and facilitate the just, quick and cheap resolution of the real issues in the proceedings. The current timetable requires our client to file and serve any application for summary dismissal or strike out by 15 March 2019. To that end, and having regard to the matters above, we enclose with this letter a proposed form of order dismissing these proceedings. You will see from those orders that, on the basis you agree to the Court dismissing the proceedings as against the bank, CBA will not seek its costs incurred in defending these proceedings to date. This offer is open for acceptance until 9:00am 15 March 2019, after which it will be withdrawn automatically. Please note that, if those orders are not signed and returned by 9:00am 15 March 2019, we are instructed to file an application for dismissal of the proceedings and will seek our client's costs of and incidental to that application, as well as our costs of defending these proceedings on an indemnity basis and in a lump sum."
3. Mrs Poulos does not dispute that she did not accept the Bank's offer of the proceedings being dismissed with no order as to costs. She said that she did not do so because she did not consider it to be a genuine offer. I disagree. The Bank's letter clearly represents a genuine offer on reasonable grounds to resolve the proceedings.
4. The Bank's letter also expressly put Mrs Poulos on notice that she was at risk of an indemnity costs order. Mrs Poulos' unreasonable refusal to accept that offer when combined with the fact that it should have been obvious, had she had the benefit of legal advice, that her statement of claim against the Bank was doomed to fail, provide proper reasons for the Court to order that costs should follow the event in favour of the Bank on the indemnity basis. The Court will do so on the basis of those reasons.
5. The orders of the Court are: 1. The proceedings as against the second defendant are dismissed. 2. The plaintiff's notice of motion filed 19 February 2019 is dismissed. 3. The plaintiff's notice of motion filed 2 April 2019 is dismissed. 4. The plaintiff is to pay the second defendant's costs of the proceedings (including for the avoidance of doubt, its costs of the notices of motion referred to in orders 2 and 3 and of the second defendant's notice of motion filed 15 March 2019) on the indemnity basis. 5. The statement of claim as against the first defendant is listed for further directions before the Registrar on 30 April 2019. 6. Direct that Exhibit 2P be returned to the plaintiff and that the Court book remain with the papers.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 April 2019