ARCHER and PERMANENT CUSTODIANS LTD - [2011] WASAT 15

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) CODE

CITATION: ARCHER and PERMANENT CUSTODIANS LTD [2011] WASAT 15

MEMBER: JUSTICE J A CHANEY (PRESIDENT)

HEARD: 8 SEPTEMBER 2010

DELIVERED : 1 FEBRUARY 2011

FILE NO/S: CC 1178 of 2009

BETWEEN: GREGORY JOHN ARCHER
VANESSA KERAN ARCHER
Applicants
AND
PERMANENT CUSTODIANS LTD
Respondent

Catchwords:

Consumer credit - Judgment against applicants in Supreme Court - Whether doctrine of res judicata applies to prevent continuation of proceedings in Tribunal

Legislation:

Consumer Credit (Western Australia) Code, s 70, s 70(2), s 70(7), s 71
Supreme Court (Court of Appeal) Rules 2005 (WA)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicants: Self-represented
Respondent: Mr BW Ashdown

Solicitors:

Applicants: Self-represented
Respondent: Galilee Solicitors

Case(s) referred to in decision(s):

Archer v Permanent Custodians Ltd
Jackson v Goldsmith [1950] 81 CLR 446
Rogers v The Queen [1994] 181 CLR 251

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The respondent sought dismissal of proceedings brought to re-open a transaction pursuant to s 70 of the Consumer Credit (Western Australia) Code. The loan agreement and mortgage which the applicants sought to reopen had been the subject of a judgment in the Supreme Court in favour of the respondent. For that reason, the respondent contended that the claim in the Tribunal proceedings was barred by operation of the doctrine of res judicata.
The Tribunal examined the history and subject matter of both sets of proceedings and concluded that it was no longer open to the applicants to pursue their claims in the Tribunal.

The application

The respondent, Permanent Custodians Ltd, (Permanent Custodians) applied to have proceedings commenced by the applicants, Gregory John Archer and Vanessa Keran Archer dismissed on the basis that the subject matter of the application is res judicata, or is otherwise an abuse of process. That application was heard together with an application by Mr and Mrs Archer for an injunction restraining Permanent Custodians from enforcing a judgment obtained by Permanent Custodians against them in the Supreme Court of Western Australia. The application for an injunction was dismissed at the conclusion of the hearing for reasons which were given orally. A decision on the application to dismiss the claim was reserved and these reasons relate to that application.

Background to the application

On 5 September 2007 Mr and Mrs Archer submitted an application for a loan to 'Bluestone Mortgages' which is a mortgage manager appointed by Permanent Custodians. The application was for what was described as a 'lo doc loan'. It consisted of some 76 pages including various identification documents, a self certification of income, a valuation report for the proposed security property and various financial statements in relation to the existing mortgage over the property. The security property was to be Mr and Mrs Archer's home at 5 Grove Park Lane, Pinjarra. The value attributed to that property in the attached valuation was $630,000. The loan purpose was shown as refinancing $424,000 and a further advance of $80,000.
On 24 September 2007, Mr and Mrs Archer signed the document entitled 'Bluestone Mortgages Loan Agreement' (loan agreement). The loan agreement recited the lender as Permanent Custodians, the borrower as Mr and Mrs Archer, and the manager as Bluestone Mortgages Pty Ltd trading as Bluestone Mortgages. The amount of the credit to be advanced was $511,013. The purpose of the loan was shown as 'refinance rates/term'.
On 5 October 2007, Mr and Mrs Archer executed a mortgage over the Grove Park Lane property.
In April 2009, Bluestone Mortgages, on behalf of Permanent Custodians, issued default notices to Mr and Mrs Archer in relation to the repayment of the loan. At that point the balance due was claimed to be $521,290.80 as at 17 April 2009.
On 12 June 2009, Permanent Custodians issued a writ in the Supreme Court of Western Australia seeking judgment for the outstanding amount under the loan agreement and possession of the Grove Park Lane property.
On 20 July 2009, Mr and Mrs Archer filed a defence in which they asserted that:
•They relied upon advice of an agent of the plaintiff known as 'Must Group' which assisted in the preparation of the loan application;
•Permanent Custodians should have been aware that neither Mr nor Mrs Archer had any regular income sufficient to meet the repayments;
•Permanent Custodians failed to make reasonable inquiry as to the ability of Mr and Mrs Archer to meet the regular repayments;
•There were substantial increases in the interest rate applicable to the loan after it was advanced;
•Neither Mr nor Mrs Archer had an opportunity to receive independent legal advice before executing the loan documents.
The defence concluded that the lo doc loan agreement was unjust 'and the defendants hereby make application to the Court to reopen the unjust transaction in accordance with the provisions of s 70 of the Consumer Credit (Western Australia) Code'.
On 22 July 2009, the proceedings came before a Supreme Court Registrar at a case management conference. The Registrar noted that jurisdiction to grant relief under s 70 of the Consumer Credit (Western Australia) Code (Credit Code) was limited, in Western Australia, to the State Administrative Tribunal (Tribunal) and that the relief claimed in the defence would require an application to be made to the Tribunal. The Registrar adjourned the matter until 5 August 2009 in order to enable Mr and Mrs Archer to consider the position.
On 5 August 2009, the matter again came before the Registrar. Counsel for Permanent Custodians advised the Registrar that Mr and Mrs Archer had not sought to discuss any proposed course of action with them and that her instructions were to proceed with an application for summary judgment. Mr Archer advised the Registrar that he had taken 'some preliminary legal advice' and that he now sought leave to put an application forward. The Registrar advised Mr Archer that he did not require her leave to make an application to the Tribunal but rather, she suggested that an application should be made to the Tribunal and served on the plaintiff. She then stated that if that course were taken, an application for summary judgment in the Supreme Court would not proceed whilst the Tribunal proceedings were being determined. The Registrar suggested that Mr and Mrs Archer should simply advise the Court by letter that they had made an application to the Tribunal.
As Mr and Mrs Archer asserted in these proceedings, the observation by the Registrar on 5 August 2009 gave a fairly clear impression that, by applying to the Tribunal, and writing to the Court advising of that fact, any summary judgment application brought by Permanent Custodians would not proceed until the Tribunal proceedings were completed.
Acting on that understanding, Mr and Mrs Archer issued their application to the Tribunal on 7 August 2009 and on the same day wrote to the Court advising of the fact that the application to the Tribunal had been made seeking relief under s 70 of the Credit Code, and confirming 'that the action brought about by the plaintiff in the Supreme Court of WA would be stayed pending the outcome of our application with the SAT of WA'.
The preliminary legal advice referred to by Mr Archer at the hearing on 5 August 2009 had been provided by solicitors, Havilah Legal. That advice was that an application should be made to the Supreme Court for an order staying the proceedings by Permanent Custodians pending the outcome of the application to the Tribunal. The solicitor's advice was, of course, the correct approach to a question of stay.
On 26 August 2009, Permanent Custodian's solicitors lodged an application to the Master in Chambers for summary judgment for the outstanding loan balance and for possession of the Grove Park Lane property. A number of affidavits were filed in support of that application. Three affidavits of Mr Archer were filed in response. They were prepared by Havilah Legal. The first, dated 18 September 2009, deposed to events which had occurred at the initial directions hearing of the application before the Tribunal in which the relationship between the Tribunal proceedings and Supreme Court proceedings was discussed. The initial return of the summary judgment application was held on 22 September 2009, but was adjourned to a special appointment on 19 November 2009.
The second affidavit of Mr Archer in response to the summary judgment application deposed to events at the second directions hearing in the Tribunal at which programming orders had been made. The third affidavit filed on 17 November 2009 reported on the progress of compliance with the programming orders in the Tribunal, and annexed a copy of the statement of issues, facts and contentions which had been lodged in accordance with those directions, and a copy of the Tribunal's orders at a second directions hearing on 9 November 2009 when the matter had been listed for final hearing on 2 February 2010.
The summary judgment application was dealt with by the Master at the special appointment on 19 November 2009. The Master delivered his written decision on 7 December 2009 concluding that the defendants had not disclosed an arguable defence, and judgment was given in favour of Permanent Custodians for the sum of $563,049.53 together with interest pursuant to the terms of the mortgage from 7 December 2009 until payment. The judgment also required delivery of possession of the Grove Park Lane property to the plaintiff.
In his reasons for decision, the learned Master made reference to the affidavits of Mr Archer which he said indicated that an application had been made to the Tribunal for a refund under the Credit Code, but concluded that there was no evidence which identified a basis upon which the Tribunal might interfere with a contractual arrangement between the parties. It should be noted that Mr and Mrs Archer were represented by Havilah Legal at the hearing before the Master.
On 22 December 2009, Mr and Mrs Archer filed a notice of appeal in the Court of Appeal against the Master's decision. The following day, the Tribunal made orders vacating the hearing for 2 February 2009 pending the outcome of the appeal. Grounds of appeal were filed by a new solicitor on behalf of Mr and Mrs Archer on 26 February 2010. The grounds complained that the Master could not have dealt with the matter because of the lack of jurisdiction of the Supreme Court under the Credit Code, and complained that the Master failed to give sufficient weight to the fact that proceedings had been commenced in the Tribunal. The submissions also made reference to the observations of the Registrar as to the plaintiff's capacity to proceed with a summary judgment application if proceedings had been commenced in the Tribunal.
In the meantime, the proceedings in the Tribunal were adjourned pending the outcome of the appeal.
On 12 March 2010, the appeal was listed for directions before a single judge of appeal. At the directions hearing, the Court pointed out that the grounds of appeal were defective and needed to be redrafted. The appellants were ordered to file an amended case on or before 26 March 2010.
A substituted appellant's case was filed on 26 March 2010. The grounds of appeal read as follows:
The Honourable Master Sanderson erred in granting the Respondent Summary Judgement [sic] on the 10 December 2009 because:
(a)The Honourable Master erred in fact by making a finding that the [appellants] had not filed a sufficiently detailed defence when in fact they had;
(b)The Honourable Master erred in law as he, in granting summary judgement [sic] against the Appellants exceeded the jurisdiction of the Supreme Court in a matter concerning alleged breaches of the Consumer Credit (Western Australia) Act 1996 (WA) which matter is pursuant to s 7 of said Act, subject only to the jurisdiction of the State Administrative Tribunal;
(c)The Appellants had a defence therefore Order 14 of the Supreme Court Rules applied;
(d)By granting summary judgement [sic], the Honourable Master was giving effect to a loan agreement and mortgage that under the original jurisdiction of the State Administrative Tribunal pursuant to s 7 of the Consumer Credit (Western Australia) Act 1996 (WA) was liable to be set aside;
(e)The matter was at the time the Summary Judgement [sic] was granted sub judice ie under judgement of the State Administrative Tribunal.
On 29 March 2010, Mr and Mrs Archer's solicitor, Ms Horwood lodged an application in the appeal seeking a stay of the order for possession and seeking leave to adduce evidence not previously before the Master. That application was listed for hearing on 28 May 2010. On 24 May 2010, the Court of Appeal Registrar issued a notice to attend to consider the application for a stay and to adduce additional evidence, and in addition requiring Mr and Mrs Archer to show cause why the appeal should not be dismissed because of a failure by the appellants to obey an order made under the Supreme Court (Court of Appeal) Rules 2005 (WA), or because none of the grounds of appeal have a reasonable prospect of success. The Court of Appeal considered that there was no substance in para 1(a), 1(b) or 1(e) of the grounds. It concluded that, as to grounds 1(c) and (d), there was no evidence before the Master upon which it could have been found that the loan agreement or mortgage was liable to be set aside by SAT, and that the grounds as expressed were plainly defective in form. Their Honours identified the real question as being whether the appellants should be given a further opportunity to adduce additional evidence to support an arguable case that the loan agreement and mortgage were unjust within the meaning s 70 of the Credit Code and are liable to be set aside under s 71. The Court said at [24] - [27]:
24The only explanation of the factual basis of the appellant's claim in SAT is set out in the affidavit of Mr Archer, sworn and filed on 29 March 2010, which accompanied the application for a stay of the judgment. In that affidavit, Mr Archer refers to the application the appellants have lodged at SAT and says that:
'[A]t the time the [respondent] or there [sic] agents or assigns advanced the money it should have been obvious that the [appellants] did not have the capacity to repay the loan and the [respondent] or their agents or assigns have breached the Code by advancing monies to me and taking a security over my property in those circumstances.'
25In addition, annexed to Mr Archer's affidavit of 21 April 2010, among other things, is a copy of a document entitled "Statement of Issues, Facts and Contentions" which the appellants have filed and served in the SAT proceedings. The document was also annexed to Mr Archer's affidavit of 17 November 2009 in the summary judgment proceedings. In neither affidavit does Mr Archer depose to the truth of the statements made in that document.
26Putting aside questions of admissibility, it therefore appears, as in McLean v Westpac Banking Corporation, the appellants contend that at the time it was entered into the loan agreement was unjust because the respondent knew, or ought to have known, that the appellants did not have the financial capacity to make the loan repayments. That in turn seems to rest on the proposition that a lender is under a duty to satisfy itself of the capacity of a borrower to repay a loan before making the loan. We were not referred to any provision of the Act or Code (or any other relevant legislative provision) which imposes such a duty. What appears from s 70(2)(l) of the Code is that whether the lender knew or could reasonably have ascertained that the borrower could not pay in accordance with the terms of the loan is a factor that SAT may take into account in determining whether, in all the circumstances, a transaction was unjust.
27The case the appellants seek to advance depends upon evidence which was not before the master. No explanation has been provided for the failure to adduce that evidence. In that connection, it is significant that at that stage the appellants had legal representation. Nor has any explanation been provided for the failure to pursue the application to adduce further evidence, although that application is clearly critical to the appeal. It has made no progress since it was filed, unsupported by an affidavit, on 29 March 2010. Despite the order of 19 April 2010 that the appellants file and serve any affidavits in support of the application by 30 April 2010, no such affidavit has been filed. The evidence upon which the appellants seek to rely remains unidentified.
The Court of Appeal concluded that it was not in the interests of justice to afford the appellants a further opportunity to put grounds of appeal in proper form given the history of the matter, and the failure of the appellants over an extended period of time to prosecute the appeal with reasonable diligence.
The Court of Appeal also declined Mr and Mrs Archer's application for a stay of the Master's order.
Following delivery of the decision of the Court of Appeal on 5 July 2010 (see Archer v Permanent Custodians Ltd [2010] WASCA 125), Mr and Mrs Archer requested an urgent directions hearing in the Tribunal for the purpose of obtaining an injunction until the proceedings before the Tribunal were completed. On 22 July 2010, the respondent sought an order for dismissal of the proceedings in the Tribunal on the grounds of res judicata, issue estoppel or alternatively as they constitute an abuse of process.

Res judicata

The principle of res judicata prohibits a party from bringing a further action in respect of a subject matter raised and determined in a prior final judgment obtained in a competent court or tribunal between the same parties litigating in the same capacity. The rationale for the rule was described by Deane and Gaudron JJ in Rogers v The Queen [1994] 181 CLR 251 at 273 where their Honours referred to the observations of Fullagar J in Jackson v Goldsmith [1950] 81 CLR 446 at 466 describing res judicata or cause of action estoppel as a 'broad rule of public policy' based on the need for judicial determinations to be final, binding and conclusive and upon the necessity to avoid the injustice which would occur if an individual litigant were required to litigate afresh matters which have already been determined by the courts. Their Honours also identified an additional principle underlying the rule, that being the need for decisions of the courts, unless set aside or quashed to be accepted as incontrovertibly correct.
The judgment of the Master determined the rights of Permanent Custodians to recover the debt due under the loan agreement and the right to possession of the property under the mortgage. Those are matters which the principle of res judicata prevents being relitigated in any other forum.
Mr and Mrs Archer's position is that, because the jurisdiction to reopen a transaction conferred by s 71 of the Credit Code is confined to the Tribunal, the Supreme Court could not, and did not, adjudicate upon their rights under the Credit Code. They contend, therefore, that their right to litigate as to the application of the Credit Code is unaffected by the judgment obtained in the Supreme Court.
Section 70 of the Credit Code gives the Tribunal the power to reopen the transaction that gave rise to a credit contract or mortgage if it is satisfied that, in relevant circumstances at the time the transactions were entered into, the contract or mortgage was unjust. By s 70(7), unjust includes unconscionable, harsh or oppressive. A number of factors to which the Tribunal is to have regard are set in s 70(2).

The remedies available to the Tribunal where it reopens a transaction are set out in s 71 of the Credit Code. That section reads:
The Court may, if it reopens a transaction under this Division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation -
(a)reopen an account already taken between the parties;
(b)relieve the debtor and any guarantor from payment of any amount in excess of such amount as the Court, having regard to the risk involved and all other circumstances, considers to be reasonably payable;
(c)set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction;
(d)order that the mortgagee takes such steps as are necessary to discharge the mortgage;
(e)give judgment for or make an order in favour of a party of such amount as, having regard to the relief (if any) which the Court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee;
(f)give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;
(g)make ancillary or consequential orders.
It is difficult to see how any remedy provided by s 71 would not amount to a collateral attack on the Supreme Court judgment. The precise remedy which Mr and Mrs Archer seek in the Tribunal proceedings, beyond simply 'reopening the transaction', has never been specified. When asked to explain his position as to the potential effect on the Supreme Court judgment of successful proceedings in the Tribunal, Mr Archer said:
.. the contract would surely be decided anywhere on a scale between the amount of monies which the respondent alleged that we owed them and nothing would be established within that hearing then surely that would call into question the value of the judgment. Because the State Administrative Tribunal will actually then value the contract, then I take it we would then amend the amount we would actually - but we need to go back to the Supreme Court to actually point out the fact that we no longer are liable for the same amount of monies that were claimed. Offset - set off.
In my view, the public policy underlying the principles of res judicata are clearly applicable to this case. That is so notwithstanding that the Supreme Court did not have the jurisdiction to invoke the remedies of s 70 and s 71 of the Credit Code. The judgment was, however, in clear knowledge of the existence of the Tribunal proceedings. Indeed, the existence of the Tribunal proceedings provided the foundation both of Mr and Mrs Archer's defence of the summary judgment application and of their grounds of appeal against the summary judgment.
Judgment was given against Mr and Mrs Archer not because the Court failed to have regard to their claim under the Credit Code, but rather because they failed to adduce any evidence that that claim had any prospect of success. As both the Master and Court of Appeal noted, while Mr Archer's affidavits annexed a copy of the statement of issues, facts and contentions filed in the Tribunal, at no time did the affidavits verify the truth of the assertions made in that document. The Court of Appeal noted that, putting aside questions of admissibility of those assertions, Mr and Mrs Archer's case seemed to rest upon the proposition that the lender is under a duty to satisfy itself of the capacity of a borrower to repay a loan, but no relevant legislative provision imposing such a duty had been identified.
It is implicit in both the judgment of the Master, and of the Court of Appeal, that had Mr and Mrs Archer produced cogent evidence to support at least a prima facie case for relief under the Credit Code before the Tribunal, judgment would not have been given. However, they failed to do so. It follows that the judgment which was entered was given on the basis that the Court was aware of the proceedings before the Tribunal, but no evidence had been adduced to suggest that the proceedings in the Tribunal had any evidentiary foundation.
Whatever might ultimately have been hoped to have been achieved by Mr and Mrs Archer in the Tribunal proceedings, it could only have, as Mr Archer acknowledged in submissions, been directed to somehow defeating the plaintiff's entitlement under the judgment obtained in the Supreme Court. The proposed proceedings were necessarily designed to defeat the binding and conclusive nature of the judgment and call into question its correctness. Mr and Mrs Archer had the opportunity to adduce evidence in the Supreme Court to demonstrate that they had an arguable case for relief under the Credit Code, but did not take that opportunity. In my view, the judgment against them now precludes them from further litigating those issues.
Mr and Mrs Archer made much of the erroneous comment by the Registrar as to the effect on the Supreme Court proceedings of an application to the Tribunal. It can be accepted that on 5 August 2009, they were misled by that comment. However, they were then represented by solicitors who had correctly advised as to the need to apply for a stay. They had ample opportunity to seek a stay before, or at, the hearing of the summary judgment application. They did not do so. Their application for a stay was dismissed by the Court of Appeal. Too much progress had been made in the litigation for any weight to be given to the Registrar's comment in the present proceedings.

Conclusion

It follows that the application to the Tribunal by Mr and Mrs Archer for relief pursuant to s 70 and s 71 of the Credit Code should be dismissed.
Permanent Custodians indicated a wish to be heard on the question of costs, and an order should be made bringing the matter back for directions in relation to the question of costs.

Orders

1.The application lodged on 7 August 2009 is dismissed.
2.If the respondent wishes to be heard on the question of costs, it should apply by letter to the Tribunal for directions on the question of costs within 14 days of receiving this order.

I certify that this and the preceding [40] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE J A CHANEY, PRESIDENT