National Australia Bank Ltd & Argus v Zollo - [2008] SASC 93

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
NATIONAL AUSTRALIA BANK LTD & ARGUS v ZOLLO
[2008] SASC 93
Judgment of The Honourable Justice Anderson
15 April 2008
CRIMINAL LAW - JURISDICTION, PRACTICE AND PROCEDURE - ADJOURNMENT, STAY OF PROCEEDINGS OR ORDER RESTRAINING PROCEEDINGS - STAY OF PROCEEDINGS - ABUSE OF PROCESS
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - JURISDICTION AND GENERALLY
Information and summons issued in Magistrates Court following long history of civil proceedings on similar issues - jurisdiction of Supreme Court to permanently stay proceedings at committal stage for abuse of process - whether a collateral attack on a final decision.
Held: Magistrates Court proceedings are a collateral attack on a final decision - Supreme Court has jurisdiction to grant stay - stay granted.
Magistrates Court Act 1991 (SA), s 9; Summary Procedure Act 1921 (SA), s 107, referred to.
Fuller & Anor v Field & State of South Australia (1994) 62 SASR 112; Clayton v Ralphs (1987) 45 SASR 347; Jago v District Court of New South Wales (1989) 168 CLR 23; Walton v Gardiner (1993) 177 CLR 378; Williams v Spautz (1992) 174 CLR 509; Rogers v The Queen (1994) 181 CLR 251; Barton v The Queen (1980) 147 CLR 75, applied.
Zollo v National Australia Bank Ltd & Anor, Full Court, Supreme Court of South Australia, 20 December 1996 (unreported); Clyne v New South Wales Bar Association (1960) 104 CLR 186; Grassby v The Queen (1989) 168 CLR 1; Hunter v Chief Constable of West Midlands Police [1982] AC 529; National Australia Bank Ltd v McFarlane [2003] VSC 19; National Australia Bank Ltd v McFarlane [2005] VSC 438; Commonwealth Bank of Australia v Heinrich [2003] SASC 322, discussed.

NATIONAL AUSTRALIA BANK LTD & ARGUS v ZOLLO
[2008] SASC 93
Civil
ANDERSON J:
Introduction

Mr Zollo has issued an information and summons in the Adelaide Magistrates Court. The summons has been issued against the National Australia Bank (“the Bank”) and Mr Don Argus, who was the principal executive officer of the Bank between 1 October 1990 and 8 December 1995.
The information contains the following counts:
Offence details
1) Between the years 1987 and 2005 the defendants jointly and severally by false pretences obtained money from the informant for the procurement of an insurance policy for the informant and failed or refused to obtain any such insurance policy for the informant.
Contrary to section 195 of the Criminal Law Consolidation Act 1935-1975 or alternatively – contrary to sections 139 and 140 of the Criminal Law Consolidation Act as amended to date.
(2)Between the years 1987 and 2005 jointly and severally deceived the informant as to the existence of an insurance policy for the protection of the informant.
Contrary to section 139 of the Criminal Law Consolidation Act 1935 as amended or to the common law.
(3) Between the years 1987 and 2005 conspired between themselves and with other persons unknown to the informant to deceive and defraud the informant with intent to deprive the informant of his property and assets.
Contrary to the common law.
(4)The defendants did pervert the course of justice by agreeing between themselves and others unknown to the informant to give false evidence to the Supreme Court of South Australia relating to the existence or otherwise of an insurance policy to be obtained by them for the informant.
Contrary to common law.
Both the Bank and Mr Argus have made an application to this Court seeking the following orders against Mr Zollo. The orders sought on the amended Statement of Claim are:
(a)an injunction restraining Mr Zollo from proceeding any further with the Magistrates Court proceedings;
(b)a mandatory injunction compelling Mr Zollo to discontinue the Magistrates Court proceedings;
(c)a declaration that the issuing and prosecution of the Magistrates Court proceedings constitute an abuse of process;
(d)     a stay of the Magistrates Court proceedings;
(e)     costs; and
(f)    such further or other orders as this court deems fit.
Background
There has been a dispute in the civil jurisdiction of this Court between Mr Zollo and the Bank for many years. The matter previously determined in this Court involved three separate actions referred to by Bollen J, the trial judge, as “the insurance action”, “the possession action” and “the damages case”.
Mr Zollo claimed in the first action that he asked an agent of the Bank, Mr Daly, to procure insurance which would indemnify Mr Zollo against payment of all monies that he could be liable to pay the Bank pursuant to his, his wife’s, or their company’s borrowings from the Bank, should he be injured and unable to earn income in his work as a builder.
Mr Zollo had an instalment loan of about $150,000 secured by mortgage. He also had an overdraft facility of about $50,000 and a Bill Finance facility of about $70,000. Mr Zollo spoke to Mr Daly about getting insurance in respect of these liabilities to the Bank. The Bank in this case was acting as agent for the insurer.
The insurer provided cover for the instalment loan but refused cover for the overdraft facility and the Bill Finance facility. The full details of the factual background to this matter are set out in the reasons of Doyle CJ in the decision of Zollo v National Australia Bank Ltd & Anor, Full Court, Supreme Court of South Australia, 20 December 1996 (unreported).
Briefly, Mr Zollo sustained an injury to his back in 1990. When he sought to claim on the insurance policy that he thought he held, he was advised that the policy only covered him in certain circumstances and only for payments of instalments pursuant to mortgages granted by the plaintiff to the Bank over real estate, in the event of Mr Zollo’s permanent total disablement from carrying out his usual occupation. Mr Zollo issued proceedings in 1993.
In the first and second actions, Bollen J found that Mr Zollo was entitled to damages for breach of contract, namely the contract to have the insurance cover sought, and also for misrepresentation and negligence under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (SA).
On appeal to the Full Court in action number 1026 of 1993 it was found that the only policy issued by the insurer was a policy in respect of the instalment loan, which policy did not provide cover for temporary disability. The Full Court decision was delivered in December 1996, and the Court then, after further argument, made the finding that the policy did not respond to Mr Zollo’s claim. The Full Court found that as the insurer was bound by the conduct of Mr Daly, an employee of its agent the Bank, it was obliged to indemnify Mr Zollo in respect of the three liabilities to the Bank in the event of him sustaining permanent total disablement as defined. There was no contract with the Bank.
On 21 March 1997 the Full Court finally dismissed the claim by Mr Zollo against the Bank. Judgment was entered for the Bank against Mr Zollo for the amount of the monies borrowed by Mr Zollo.
As indicated the Full Court dealt with the issue of the insurance cover on the basis that the cover was only for permanent total disablement and that Mr Zollo was not permanently and totally disabled within the meaning of the policy. His claim therefore failed for that reason.
After the Full Court decision Mr Zollo sought special leave to appeal to the High Court of Australia. On 11 December 1997, an application by Mr Zollo for special leave to appeal to the High Court was refused.
Mr Zollo then attempted to reopen the matter before the Full Court by seeking to set aside the Full Court judgment. Eventually the Full Court dismissed this application on 12 June 1997. The Bank then attempted to enforce the judgment it held against Mr Zollo. He did not pay the judgment amount and the Bank then issued bankruptcy proceedings in the Federal Court.
Mansfield J made an order on 27 June 2000 adjudging Mr Zollo to be bankrupt and at the same time rejected a request by Mr Zollo to have the bankruptcy petition adjourned. This was during the time that Mr Zollo was attempting to reopen the matter in the Full Court. Mansfield J dismissed Mr Zollo’s application on the grounds, inter alia, that Mr Zollo’s application to set aside the Full Court judgment had no reasonable prospect of success.
Mr Zollo then sought leave to appeal from Mansfield J’s decision and Kiefel J refused leave for Mr Zollo to appeal out of time on the ground that the appeal had no reasonable prospect of success. Mr Zollo then sought special leave again, this time from the decision of Kiefel J and that application was again refused by the High Court.
After he was released from his bankruptcy Mr Zollo sought again to re-agitate the same issues by applying in December 2006 for further discovery of documentation which he wanted to enable him to again challenge the Full Court judgment. His application was then dismissed by a master.
The question of the insurance policy and whether it provided cover for Mr Zollo because of his medical condition has therefore been determined by a trial in this Court and an appeal. It was further canvassed in an unsuccessful attempt to re-open the case. The merits have also been considered in passing by two judges of the Federal Court and twice the High Court of Australia has refused Mr Zollo a grant of special leave, once in the civil action in this court, and then again on appeal from the Federal Court in relation to the bankruptcy proceedings.
The Bank’s application for a stay
The Bank and Mr Argus seek a stay of the proceedings issued in the Magistrates Court on the basis that the information is an abuse of process. It is alleged that it is an abuse of process because the proceedings in the Magistrates Court were issued for an improper collateral purpose, namely the impugning of the decision of the Full Court of 21 March 1997. In addition, it is claimed that the proceedings in the Magistrates Court have been issued for the improper purpose of advancing Mr Zollo’s civil claim against the Bank. Mr Abbott QC for the Bank points to a letter of 21 November 2001 in which Mr Zollo invited the Bank to settle his civil claim in order to avoid criminal investigations. Mr Abbott contends that these criminal proceedings are leverage for a settlement favourable to Mr Zollo. Mr Zollo denies that inference.
In the application to reopen the case before the Full Court, Mr Zollo claimed that he should be able to produce fresh evidence because he alleged that the Bank had deceived him in relation to insurance policies in its possession. Mr Zollo’s claim of the Bank’s alleged lies and deceit were found to be unsubstantiated a long time ago.
Mr Abbott in his submissions made it clear that the Bank was seeking either interlocutory or final injunctive relief against Mr Zollo to prevent him from continuing with the present criminal proceedings or from commencing any new charges. Because I have now heard full arguments on the issues I will only consider the question of final relief.
Jurisdiction of the Supreme Court
The Supreme Court has an inherent jurisdiction to stay proceedings which are an abuse of its own proceedings. As noted by the High Court in Williams v Spautz (1992) 174 CLR 509, 518:
It is well established that Australian superior courts have inherent jurisdiction to stay proceedings which are an abuse of process... The jurisdiction extends to both civil and criminal proceedings.
footnotes omitted
The Full Court in Fuller and Another v Field and State of South Australia(Intervener) (1994) 62 SASR 112 affirmed the decision in Clayton v Ralphs (1987) 45 SASR 347, that this Court has an inherent jurisdiction to stay committal proceedings for abuse of process.
It is clear that Australian courts possess inherent jurisdiction to stay proceedings which are an abuse of process (Clyne v NSW Bar Association (1960) 104 CLR 186; Barton v The Queen (1980) 147 CLR 75). The High Court in Jago v District Court of New South Wales (1989) 168 CLR 23 considered the circumstances in which the power to permanently stay criminal proceedings may be exercised. The High Court noted at 34:
… a permanent stay should be ordered only in an extreme case… To justify a permanent stay of criminal proceedings, there must be a fundamental defect which goes to the root of the trial ‘of such a nature that nothing that a trial judge can do in the conduct of the trial can relieve against its unfair consequences’: Barton (1980) 147 CLR 75, at p 111, per Wilson J.
It follows that the Supreme Court has jurisdiction to injunct the institution of criminal proceedings in the Magistrates Court which constitute an abuse of process. Recent examples of a Supreme Court using its powers to injunct a dissatisfied litigant in the civil jurisdiction from issuing criminal proceedings are found in National Australia Bank Ltd v McFarlane [2003] VSC 19, National Australia Bank Ltd v McFarlane [2005] VSC 438 and Commonwealth Bank of Australia v Heinrich [2003] SASC 322.
Jurisdiction of the Magistrates Court
There is a question as to whether the Magistrates Court has power to stay its own proceedings. On the face of it, the Magistrates Court has an inherent jurisdiction to prevent an abuse of its processes and to regulate its own proceedings. However, whether such powers exist for a magistrate to impose a permanent stay of committal proceedings on the ground of abuse of process is viewed differently.
In Grassby v The Queen (1989) 168 CLR 1, Dawson J said at 18:
Indeed, having regard to the inability of a magistrate to stay the trial, it is not possible for him to know conclusively whether the person charged may, having regard to the interests of justice, safely be deprived of the advantage of committal proceedings.
The decision in Grassby on its face tends to indicate that there is no authority for a magistrate to stay a trial at the committal proceeding stage, because at that stage there is no capacity to know whether it is entirely appropriate to do so. It is also said that the court at that stage is acting in an administrative rather than a judicial capacity.
Grassby therefore highlights an exception to the general principle that magistrates have inherent power to stay their own proceedings.
Procedure in the Magistrates Court
Both of the offences relevant to this application are major indictable offences. By virtue of s 9 Magistrates Court Act 1991 (SA) the court has jurisdiction to conduct a preliminary examination on a charge of an indictable offence.
Before an accused person can be sent for trial for an indictable offence, a committal hearing must be held before a Magistrate. As a preliminary hearing, it is conducted primarily to establish whether there is a sufficient case against an accused to merit proceeding to trial. Once a magistrate has determined that the prosecution evidence is sufficient to put the defendant on trial on the basis that, if accepted, it would prove every element of the offence, the magistrate is required by s 107 Summary Procedure Act 1921 (SA) to commit the defendant for trial.
It seems clear on the history of this matter that whether or not the Magistrates Court has power to permanently stay committal proceedings, this matter will likely end up in this court on appeal and I have therefore decided for practical reasons that I should in any event deal with it now. I have however determined the matter on the basis that the Magistrates Court can not grant a stay for an abuse of process at the committal stage but that this court has the necessary power to do so.
Abuse of process – collateral attack
The plaintiffs submitted that the criminal charges brought by Mr Zollo constitute an impermissible collateral attack on a judgment of this court and constitute the ongoing commission of the tort of collateral abuse of process.
Hunter v Chief Constable of West Midlands Police [1982] AC 529 is regarded as a leading authority on abuse of process. Lord Diplock said (at 541):
The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made.
Mason CJ discussed the differing circumstances in which abuse of process may arise in Rogers v The Queen (1994) 181 CLR 251. He said at 255:
The concept of abuse of process is not confined to cases in which the purpose of the moving party is to achieve some foreign or ulterior object, in that it is not that party’s genuine purpose to obtain the relief sought in the second proceedings. The circumstances in which abuse of process may arise are extremely varied and it would be unwise to limit those circumstances to fixed categories. Likewise, it would be a mistake to treat the discussion in judgments of particular circumstances as necessarily confining the concept of abuse of process.
footnotes omitted.
His Honour went on and referred to Williams v Spautz and said at 255:
Williams v Spautz is a case in point. Although the majority judgment concluded that there was, in that case, an abuse of process consisting in the initiation of proceedings for an ulterior and improper purpose, the majority recognized that the concept extends beyond use of court processes for ulterior purposes to the use of such processes so as to cause vexation or oppression.
His Honour then referred to Walton v Gardiner (1993) 177 CLR 378 (at 255) and said:
In that case, Mason C.J., Deane and Dawson J.J. stated that the inherent jurisdiction of a superior court to stay its proceedings for abuse of process:
extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness.
Their Honours went on to say:
[P]roceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate a new case which had already been disposed of by earlier proceedings.
footnotes omitted
Williams v Spautz established the principle that it is sufficient to constitute an abuse of process if the proceedings are instituted for an improper purpose. Debelle J noted in Commonwealth Bank of Australia v Heinrich at [46] that
it is an abuse of process when the party commencing the proceedings has previously threatened that, unless the other party complies with some improper demand the first party has made, criminal proceedings will be commenced and prosecuted to a conviction. In such a case, the very commencement of the proceedings amounts to use of them for an improper purpose: Williams v Spautz at 528. See also Brennan J at 533 – 535.
Later in these reasons I find that Mr Zollo has initiated the criminal proceedings for the purpose of mounting a collateral attack on the judgment of the Full Court.
The charges in the Magistrates Court
The charges are on their face inconsistent with the earlier civil judgments in this court. Each charge is an assertion as to the existence of an insurance policy and allegations of the result being obtained only after deceit, false pretences and a perversion of the course of justice.
The fact that Mr Argus has been joined only because he was the chief executive officer is a further indication of Mr Zollo’s misguided attempts to achieve his goal in the criminal count when he could not do so in the civil court.

I have decided that the information and summons taken out by Mr Zollo in the Magistrates Court is an abuse of process and should be permanently stayed. I have found that the issues raised in the summons are either identical or so clearly related to the issues finally determined in the civil action that Mr Zollo is, as Mr Abbott submitted, engaging in a process to collaterally attack the findings of the Full Court.
The matters which have influenced me in coming to this conclusion are as follows:
1.the offences detailed in the summons contain allegations relating to a policy of insurance;
2.the policy and all background matters relating to it are the subject of detailed analysis by both the trial judge and the Full Court in action number 1026 of 1993;
3.the Full Court made findings as to the obligation of the Bank to indemnify in certain circumstances which it found did not apply to the facts of Mr Zollo’s case. In other words on the facts, as found by the Full Court, the policy did not respond;
4.the offences detailed seek to re-agitate the issues surrounding the insurance policy in a number of ways
5.in addition to the Full Court decision referred to, Mr Zollo sought to raise the issues again by applying to reopen his case. This application was refused by the Full Court;
6.in that application it is apparent that Mr Zollo was raising, or attempting to raise, the very issues relevant to his assertions of false pretences, deceit, conspiracy to defraud and perverting the course of justice, which had been earlier disposed of;
7.there is no justification at all for joining Mr Argus in these proceedings as he had no dealings with Mr Zollo;
8.Mr Zollo filed an affidavit sworn by him on 11 March 2008 as part of his submissions opposing the orders sought by the Bank. In it he describes the basic elements of the charges he has laid in the Magistrates Court as follows:
1.     That I applied to the NAB for insurance to cover the payments of my various accounts with the plaintiff bank on the terms of the Hindmarsh Building Society Insurance (a copy of which is now produced ‘AZ1”). This document was handed by me by the then manager Daley of the plaintiff bank, Port Lincoln branch.
2.     That money was taken from my account at the Port Lincoln branch of NAB to pay for a policy with the same terms and conditions as the Hindmarsh Building Society policy.
3.     That no such policy was ever issued by the bank or its insurers to cover my borrowings.
4.     That I was informed by Mr Grant Bailey that the bank had an insurance policy covering the same position as the Hindmarsh Building Society policy.
5.     That no policy of any kind was ever issued in fact by the plaintiff bank or its insurer. That as a result thereof, as a consequence of the facts I was deceived and defrauded.
I have set out this passage from Mr Zollo’s affidavit because it illustrates how the issues he seeks to raise in the criminal proceedings are the same issues which have been heard and finally determined by the Full Court. He also illustrates his fundamental misunderstanding of what findings were made in the Full Court and the effect of those findings.
Conclusion
Mr Zollo in both his written and oral submissions to me is continuing the theme of his unsuccessful civil action. He has not attempted to address the issue of why this is not a collateral attack on the Full Court judgment nor is there any hint of any new evidence which could support the charges he has laid. He merely repeats the issues and allegations he made unsuccessfully in the civil court. There is a lack of anything substantive or material in the submissions which have been made.
It is for these reasons that I will make an order granting a permanent stay of the proceedings issued in the Magistrates Court. I will hear the parties on the formal orders I should make.