Pertsinidis v Aust Central Credit Union Ltd No. Scciv-01-294

PERTSINIDIS & ANOR v AUSTRALIAN CENTRAL CREDIT UNION LTD
[2001] SASC 244
Full Court: Doyle CJ, Williams and Martin JJ

DOYLE CJ: I have had the advantage of reading in draft the reasons of Williams J. I agree that the appeal should be allowed and that the Court should make the orders proposed by Williams J.
In deference to the carefully reasoned decision of the District Court Judge, I propose to state briefly the basis upon which I agree with the orders proposed. I will not repeat the circumstances giving rise to the issues argued on appeal, except to the extent necessary to do so to express my own view. All of the relevant matters are to be found in the reasons of Williams J.
The first action
The Australian Central Central Union Limited (“ACCU”) sued the Pertsinidis in the Supreme Court for possession of premises, relying on a mortgage given by the Pertsinidis to ACCU to secure a loan made under a written loan agreement. ACCU asserted that the Pertsinidis were in default under the loan agreement. ACCU made no claim to recover money due under the loan agreement.
The Pertsinidis filed a defence in which they denied default, relying on the meaning of the loan agreement. ACCU contended for a different meaning of the loan agreement.
The issue between the parties was, in effect, whether the loan agreement entitled the Pertsinidis to repay the loan over 20 years, and whether ACCU was entitled to vary the term of the loan. For example, if the interest rate payable was reduced by ACCU, could ACCU decline to reduce the amount of the monthly repayment, thus shortening the term of the loan?
To support their contention as to the meaning of the loan agreement, the Pertsinidis relied on extrinsic evidence, including representations allegedly made by an employee of ACCU, before the Pertsinidis entered into the loan agreement.
The Pertsinidis counter-claimed that if the loan agreement had the meaning for which ACCU contended, and the Pertsinidis were in default, then the representations by the employee of ACCU were such as to entitle them to rectification of the loan agreement to make it reflect their understanding of its effect.
Their counterclaim was that the representations by the employee of ACCU constituted misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”) and contrary to s 56(1) of the Fair Trading Act 1987 (SA) (“the FTA”). Hereafter I will confine my attention, by and large, to the claim under the TPA.
The counterclaim did not state how the entitlement to the remedy of rectification arose. I assume that the Pertsinidis intended to rely on s 87(1A) and s 87(2) of the TPA. As Williams J points out, by virtue of s 87(1C) of the TPA, relief could be granted under s 87(1A) and s 87(2) even though no other proceedings for relief under Part VI of the TPA were on foot.
In particular the Pertsinidis were entitled to claim rectification under s 87(2) of the TPA without advancing a claim under s 82(1) for loss or damages suffered by conduct of ACCU in breach of s 52 of the TPA.
For the reasons given by Williams J, the same is true in relation to the FTA.
The first action was commenced by summons issued under Part XVII of the Real Property Act 1886 and r 65 of the Supreme Court Rules. The hearing of the claim for possession proceeded on oral evidence before a Master.
At an early stage of the hearing of the first action in the Supreme Court, it was accepted that if the loan agreement had the meaning for which ACCU contended, the Pertsinidis were in default under the loan agreement and ACCU was entitled to possession. It was also accepted that if the loan agreement had the meaning for which the Pertsinidis contended, they were not in default, and ACCU was not entitled to possession.
The Pertsinidis relied on the representations allegedly made by the employee of ACCU, both as extrinsic evidence upon which they could rely for the purposes of interpreting the loan agreement, and in the alternative as conduct in breach of s 52 of the TPA and s 56 of the FTA on the basis of which the Court should order rectification.
Both ACCU and the Pertsinidis were arguing, as their respective primary contentions, that the loan agreement was not ambiguous. Each of them argued that the Court should interpret the loan agreement without reference to extrinsic evidence. However, each of them was proposing to rely on extrinsic evidence, should the Judge decide that the loan agreement was ambiguous and that resort could be had to extrinsic evidence.
ACCU led evidence from the employee who had allegedly made the representation relied on by the Pertsinidis. He was cross-examined by counsel for the Pertsinidis. ACCU led this evidence apparently because it elected to meet the counterclaim for rectification as part of its case.
When the Court resumed on the second day of the case, the ACCU employee had completed his evidence, subject to one outstanding point. Counsel for ACCU had two other intended witnesses in attendance. Counsel for the Pertsinidis then informed the Court that they were not pursuing the counterclaim for rectification. He said that they still relied on the extrinsic evidence to support their contention as to the meaning of the loan agreement.
After further discussion between counsel and the Master, the Master intimated that in his opinion there was no ambiguity in the loan agreement of a kind that would permit resort to extrinsic evidence, and he invited the parties to proceed accordingly. He did so because counsel for ACCU and for the Pertsinidis confirmed that their “primary contention” was that there was no ambiguity in the written loan agreement. Each of them relied on extrinsic evidence only if the Master decided the loan agreement was ambiguous. The Master’s invitation meant that the Master would not have regard to the evidence that had been led by ACCU, and the evidence that was foreshadowed by the Pertsinidis, in determining the meaning of the loan agreement.
A little later, ACCU closed its case. Counsel for the Pertsinidis then elected to call no evidence. By then the Master had been given a statement of agreed facts. It confirmed that if ACCU’s contention as to the meaning of the loan agreement was correct, ACCU was entitled to possession, and, in effect, that if the Pertsinidis’ contention was correct, the claim for possession should be dismissed.
The Master found for ACCU on the construction of the loan agreement, and ordered that it be given possession of the premises. As Williams J records, no order was made dealing with the counterclaim for rectification.
The second action
The second action was brought by ACCU in the District Court. In this action ACCU claimed the balance due under the loan agreement.
The Pertsinidis filed a defence and counterclaim. They again pleaded the representations allegedly made by ACCU’s employee, apparently to support a defence that they were not, and had not been, in default. This was done despite the fact that the issue of default had been determined against them in the Supreme Court proceedings. It seems to me, although I do not have to decide the point, that the defence to the claim was doomed to failure.
The Pertsinidis also made a counterclaim for damages. The counterclaim was based on the representations allegedly made by the ACCU employee. They are substantially the same representations as those relied on in the first action. I gather that the Pertsinidis’ counterclaim was that they had been induced to enter into the loan agreement by statements misrepresenting the term of the loan agreement.
The representations were again alleged to constitute misleading and deceptive conduct contrary to s 52 of the TPA and s 56 of the FTA. ACCU joined issue on the defence. As to the counterclaim, ACCU pleaded that the claim made therein had been determined in the Supreme Court proceedings; pleaded an estoppel as a result of ACCU acting to its detriment on its understanding that the subject of the counterclaim was abandoned, and pleaded a claim that the counterclaim was an abuse of process.
Williams J has described the course the proceedings took when they came on for trial before a Judge of the District Court.
The appeal to this Court
As I have said, Williams J has summarised the decision of the District Court Judge, and the issues that arise on appeal. Accordingly, I can proceed straight to the heart of the matter.
In light of the decision not to pursue the counterclaim for rectification, the Pertsinidis must be taken to have finally abandoned any such claim. ACCU would have been entitled to a judgment on the counterclaim for rectification, had it sought such an order at the end of the first action. The meaning of the agreement is settled by the decision of the Master.
But in the second case the Pertsinidis, while relying on the same facts as they relied on in the first action, do so in support of a different claim or cause of action. The claim or cause of action is for damages. In the first action it was for rectification.
In the first action, the Pertsinidis might have limited their case to the question of the meaning of the loan agreement and whether they were in default. But they had to make any counterclaim for rectification then. Had they failed to do so, they would have been estopped from raising such a claim later.
They were under no obligation to put forward their counterclaim for damages at that stage. They were entitled to leave it to be advanced if and when ACCU claimed any balance due. On the claim by ACCU for possession, assuming default was made out, a counterclaim for damages was irrelevant. ACCU would be entitled to possession on proof of default, at least unless the counterclaim would extinguish the debt due to ACCU. Just as ACCU’s claim for possession and for the balance due were separate and distinct, so were the defence denying indebtedness and the counterclaim for damages.
Nor can it be said that a judgment for the Pertsinidis on the counterclaim in the second action would be contradictory of the judgment for ACCU in the first action. The issues raised in the first action and disposed of by the judgment for ACCU are quite different from those raised and to be disposed of in the second action.
The issue now before the Court is the significance of the fact that the Pertsinidis, in support of their submission as to the meaning of the loan agreement, and in support of their claim for rectification, put forward a case based on the same facts which they now use to support their counterclaim for damages. It is the reliance on the facts, now used to support the counterclaim for damages, in support of their case as to the meaning of the loan agreement, that raises the question of the so-called Anshun estoppel.
A decision that the Pertsinidis are now estopped from advancing their damages counterclaim is a decision, in effect, that having put forward relevant facts to support their contention as to the meaning of the loan agreement, they were obliged to pursue that issue of fact to its end, in the face of the intimation by the Master that he did not propose to have regard to extrinsic evidence, and even though, in the light of that intimation, it was likely that the Judge would not make any finding on the facts, had they been fully explored before him. It is also a decision that, having advanced a counterclaim on those facts, they were obliged to include any claim for damages based on the same facts, or risk being unable to pursue their damages claim, even though the damages claim was no answer to the claim for possession, and even though ACCU was entitled to claim possession and the balance due in separate actions.
This analysis suggests that it would not be just to hold that the Pertsinidis are estopped. It is not a case in which I would draw an inference that they acted as they did because, having embarked on the facts, they thought they could not succeed. It was not a calculated tactical retreat. The decision to call no evidence was made only after the Judge had intimated that he would not have regard to extrinsic evidence.
It is equally clear that the cause of action in damages has not been adjudicated upon. Nor is there an issue estoppel on the facts. There would have been (one way or the other) had the Master made findings on them, but the Master did not do so. The only matter that has been adjudicated is the meaning of the loan agreement, the fact of default, and the entitlement to possession.
The decision on appeal turns on the application of the principles stated by the majority of the High Court (Gibbs CJ, Mason and Aickin JJ) in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The relevant principle is as follows (at 602-603):
“In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.”
In considering the application of this principle, I have been assisted by the views expressed by the Court of Appeal of the Supreme Court of New South Wales in Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 and by the Full Court of the Federal Court of Australia in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287.
The principle stated by the High Court in Anshun is not one that can be applied mechanically. A test expressed in terms of what is unreasonable does not permit such an approach, even when allowance is made for the particular context in which the principle is to be applied. And, as the High Court stated, it is necessary to consider whether there may be circumstances such that “a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings .....”. I also bear in mind that the relevant principle is not one based on notions of abuse of process, but nevertheless, as Samuels JA said in Boles (at 671) it may ultimately be founded “upon broad considerations of public policy”. I bear in mind also that in Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 346, Brennan and Dawson JJ stated that the Anshun principle will ordinarily not apply to counterclaims. However, I consider that I should proceed on the basis that the principle may apply to such claims, this limitation not having been adopted by a majority of the Court.
I return to the principle stated in Anshun.
It may be that the question to be considered is whether the counterclaim for damages is so relevant to the claim for possession made by ACCU in the first action that it would have been unreasonable not to rely on it in the first action. If that is the question, my answer is that it was not unreasonable not to raise the damages counterclaim in the first action. For reasons that I have already explained, they are quite different issues and, despite the fact that each claim raised a dispute over the same facts, it would not have been convenient to dispose of the damages claim in the course of the claim for possession. There was every reason not to pursue the damages claim at that stage.
It may well be that the true issue is whether the counterclaim for damages in the second action is so relevant to the counterclaim for rectification in the first action that it is unreasonable not to have raised the damages counterclaim in the first action. Support for an affirmative answer to this question lies in the fact that the rectification counterclaim and the damages counterclaim are based on the same facts and on proof of the same matter, namely misleading and deceptive conduct contrary to s 52 of the TPA and s 56 of the FTA. The trial Judge answered this question in the affirmative. His reasoning was as follows:
“The defendants had available to them in the first proceeding the very claim, alleged conduct by the plaintiff in breach of the Trade Practices Act and the Fair Trading Act, a curial investigation of which was in my opinion intimately related to the plaintiff’s claim against them; a determination of the defendants’ claim either for them or against them would have ensured finality of litigation (Anshun at 609 per Brennan J and Bryant at 299) and preserved ‘the orderly administration of justice’ (Anshun at 605 per Murphy J.) two principles upon which Anshun proceeds. The defendants were faced with the plaintiff’s action for possession of the property they had mortgaged to the plaintiff which if successful would no doubt be followed by the sale of the property. The defendants set up a counterclaim, in advancing which they clearly recognised what in my view was obvious namely the reasonableness, if not indeed the necessity, of putting before the Court the matters they complained about as an integral part of the very transaction upon which the plaintiff founded its action - the contract of loan and the mortgage given to secure the defendants’ obligation under that contract. In my opinion it would have been unreasonable for the defendants to not put before the Court their claims that the alleged representations were made. I do not accept the submission that, analogous to the separate steps taken by the bank in Boles, the defendants would have been reasonably justified in confining their challenge to the plaintiff’s case to the proper interpretation of the contract of loan and being silent concerning their case of the conduct by the plaintiff in breach of the Trade Practices Act or the Fair Trading Act when that conduct was not by any test peripheral to or remote from the plaintiff’s claim. That the defendants did plead that alleged conduct is testament in my view to the incongruity of the position they now adopt that it would not have been unreasonable to fail to advance that case and it was not unreasonable to withdraw it. In my opinion the matter now relied upon was so relevant to the subject matter of the proceedings before the Supreme Court that it was unreasonable for the defendants not to rely on it.”
I would, with respect, answer the question differently, and for these reasons.
I start with a point made above - that just as ACCU’s claim for the balance due under the loan agreement is a separate claim from its claim for possession under the mortgage, and one that may be brought separately, so, in principle, are the Pertsinidis’ claims for rectification of the loan agreement and their claim for damages (in answer to the claim for the balance due under the loan agreement) for loss suffered by allegedly misleading and deceptive conduct by ACCU which caused the Pertsinidis to enter into the loan agreement. There is nothing inconvenient or inconsistent in the Pertsinidis withholding the counterclaim until any loss had crystallised, and until ACCU itself had made a claim for the balance due. There was good reason to litigate these matters separately. Indeed, as I have pointed out, an attempt to litigate the damages claim in the proceedings for possession would probably have been met with the response that the issue of damages should be determined later, and was no answer to the claim for possession.
The next matter on which I would rely is the fact that, in the first action, both parties agreed that the contest over the extrinsic facts should be put to one side. They finally joined issue only on the meaning of the loan agreement, considered without regard to the extrinsic evidence. In the light of the intimation from the Master, this was a sensible and convenient approach to take. The result is that the facts which constitute the basis of the counterclaim in the first action and in the second action have never been adjudicated upon. There is no reason to think that, had the damages claim been advanced in the first action, the parties would have followed a different course of action. There is every reason to think that the damages claim would still have been left for another day.

The course that has been followed does not erode the finality of litigation or the orderly administration of justice. The Pertsinidis do not seek a second adjudication on the one set of facts. They do not seek a result which is contradictory of the earlier result. Nor is the claim for damages so intimately connected with ACCU’s claim in the first action, or their counterclaim in the first action, that both should be litigated at the one time.
What would the position be if the Master had adjudicated on the facts raised by the counterclaim in the first action? If the Master had found for ACCU, it would now have the benefit of an estoppel or a claim of res judicata on the Pertsinidis’ claim of breaches of s 52 of the TPA and s 56 of the FTA. If the Master had found for the Pertsinidis, it is likely that the loan agreement could have been rectified, and no order for possession made. At the least, the Pertsinidis would now have the benefit of an estoppel or a claim of res judicata. This illustrates the link between the two counterclaims, but does not provide a reason for saying that they had to be litigated together. There is nothing unreasonable about allowing the Pertsinidis to deal with matters as they did.
The other point I would make is that had the Pertsinidis, in the first action, confined themselves to an argument as to the meaning of the loan agreement, without reference to extrinsic evidence, it could not be suggested that they could not advance the counterclaim filed in the second action. In raising the extrinsic evidence they produced a situation in which findings by the Court would probably determine the fate of the later counterclaim. But that seems no reason to me to require them to include that counterclaim.
In my opinion the present case is not a case like Bryant. In that case, without going into detail, the claim made in the second action was one which attacked the operation and effect of the agreements that had been the subject of adjudication in the earlier action: see the terms of the application in the second action, and the summary of the allegations, at 57 FCR 287 at 293. Granted, the issues raised in the second action had been raised in the first action in Bryant, but in Bryant, unlike the present case, much of the relief claimed in the second action was relief which would undermine and, in my opinion, be contradictory of the orders made in the first action. It is important to bear in mind that in Bryant, which in many respects is a similar case, the first action resulted in a judgment for moneys claimed. Moreover, in Bryant there was no good reason for the withdrawal of the allegations in the first action and the attempt to raise them in the second action. In the present case, there was good reason not to pursue the factual dispute in the first action.
It is true that in the present case the Pertsinidis abandoned their counterclaim before the Master intimated that he would not have regard to the extrinsic evidence. But the Pertsinidis abandoned their claim on the facts only after the Master had made that intimation. So, even if my earlier reasoning is wrong, it seems to me that the parties having justifiably withdrawn the factual dispute from adjudication, either party should now be at liberty to raise that factual dispute again.
Conclusion
For those reasons I would allow the appeal, and make the orders proposed by Williams J.
WILLIAMS J:
1 The Determination of a Preliminary Point
This is an appeal by the defendants from a decision of a District Court Judge upon a preliminary point raised at trial.
The question at issue is whether in this action, the defendants are entitled to maintain a counterclaim based upon allegations of fact which the defendants raised but did not pursue in earlier proceedings.
The defendants’ counter claim contains the same allegations of misleading conduct which gave rise to their defence and counterclaim in the earlier proceedings between the same parties. In the first action the defendants sought an order for variation (or rectification) of contract under s 87(2)(b) of the Trade Practices Act 1974 (Cth) whereas in the second action they seek damages under s 82. (Alternative claims are raised under the corresponding provisions of the Fair Trading Act 1987 (SA). Both actions arise out of the alleged default by Mr and Mrs Pertsinidis in repaying monies lent to them by the Australian Central Credit Union upon the security of a mortgage over real estate. In the first action, the Credit Union sought (and obtained) possession of the mortgaged premises in order to facilitate a sale. In the present action the Credit Union is seeking to recover the balance of the debt after the forced sale of the premises produced a shortfall. The Credit Union is entitled to bring these successive actions by virtue of the provisions of the Real Property Act 1886 (SA) and the Rules of Court.
The summons for ejectment in the first action was issued on 3 April 1997 and the defence and counterclaim was filed on 11 December 1997. The second action was commenced on 7 May 1999 and the defence and counterclaim was filed on 17 June 1999.
Although the defendants took their allegations to trial in the first action, their complaint was never the subject of an adjudication by reason of the way in which the defendants then chose to confine the dispute by abandoning their counterclaim. Eventually, the Court was only required to construe the loan agreement and for this purpose had available to it oral evidence as to the matrix of facts as pleaded. However, the allegations of misleading conduct were never discharged from the record; the Court construed the agreement without relying upon the extrinsic evidence.
By his reasons dated 22 December 2000, the District Court Judge held that the defendants were not entitled to maintain their counterclaim in this action. An order with respect to the preliminary point was entered on 19 January 2001 and a consequential order in favour of the plaintiff in respect of its monetary claim in this action was entered on 1 March 2001. A composite notice of appeal in respect of each order has been filed but the court is now only directly concerned with the order disposing of the preliminary point. The reasoning of the District Court Judge led him also to strike out a paragraph in the defence but that aspect of the order of 19 January 2001 is not the subject of complaint in the grounds of appeal.
The Trial Judge based his decision upon a line of cases stemming from Port of Melbourne Authority v Anshun Pty Ltd (“Anshun”) (1980-81) 147 CLR 589. That case dealt with the ability of a party in later proceedings to pursue a point which the party has failed to raise in earlier proceedings between the same parties. The present case is different in that it is argued that the defendants have now put forward a counter claim based on facts which, during trial of the earlier action, they then declined to pursue after some evidence was taken. An unsuccessful defence to the earlier action was also taken some way at trial and based on the same allegations of misleading conduct which supported the abandoned counter claim.
The plaintiff as respondent to this appeal relies heavily upon the reasons of the majority in Anshun at 602-603:-
“In these cases in applying the Henderson v Henderson principle to a plaintiff said to be estopped from bringing a new action by reason of the dismissal of an earlier action, Somervell LJ and Lord Wilberforce insisted that the issue in question was so clearly part of the subject matter of the initial litigation and so clearly could have been raised that it would be an abuse of process to allow a new proceeding. Even then the abuse of process test is not one of great utility. And its utility is no more evident when it is applied to a plaintiff’s new proceeding which is said to be estopped because the plaintiff omitted to plead a defence in an earlier action.
In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.”
This is not a case in which it is suggested that a judgment will conflict with the judgment which the plaintiff earlier obtained. The plaintiff relies upon the unreasonableness of the defendants’ conduct. Whether the defendants are precluded by their conduct in the earlier action from now prosecuting their counterclaim may not only involve questions of law. A question of fact may arise as to the defendants’ explanation by way of justification for their conduct (see Tanning Research Laboratories Inc v O’Brien (1989-90) 169 CLR 332 at 355 per Toohey J and Anshun at 603 supra). It may therefore be questionable whether the point is one which is suitable for determination as a preliminary point without a full trial. Nevertheless, it appears that the parties approved of the procedure which was adopted.
The trial judge made his determination at the invitation of the parties. Although the point was determined summarily on affidavit evidence and by reference to the Court record, the appellants concede that they could not improve their position if given any further opportunity to present evidence. For the purposes of this appeal, the judgement of the District Court Judge should be treated as a final determination after a full hearing.
2 An overview of the two actions
(a) The First Action
Pursuant to an agreement in writing dated 4 February 1992, the plaintiff Credit Union made a loan of $208,000 to the defendants upon the security of a registered first mortgage over the defendants’ property known as the Carey Gully General Store; the loan was repayable by instalments. Upon default in repayment, the Credit Union called up the debt, and, in accordance with the Real Property Act 1886 (SA), Pt XVII brought ejectment proceedings in the Supreme Court (Action 501 of 1997) in order to enforce the security. Those proceedings (the first action) were defended, but, an order for possession in favour of the Credit Union was eventually made by a Master; an appeal therefrom to a Judge (Wicks J) was unsuccessful. The point ultimately decided in the first action was whether upon the proper construction of the loan agreement the defendants were in default with their repayments; extrinsic evidence in aid of the construction was put before the Master but he resolved an alleged ambiguity in the loan agreement by confining himself to an examination of the document. Wicks J did likewise.
The hearing of the first action proceeded on oral evidence because the defence put in issue the circumstances which led to the making of the loan agreement. During this hearing (but after the Credit Union’s manager had given evidence and been cross-examined) the defendants abandoned a counterclaim seeking rectification of the loan contract and relief in respect of misleading and deceptive conduct and false representations allegedly made by the plaintiff. This step was announced by the defendants’ counsel to the Master in open Court. The counterclaim was not formally discontinued in accordance with the Rules of Court and there was no application for leave to discontinue; no judgment was sought by the Credit Union upon the counterclaim. This informality in disposing of the defendants’ counterclaim in the first action has now given rise to an issue as to the legal effect of the procedure which was adopted; the appellants now argue that there was an informal discontinuance.
Discontinuance of an action (including a counterclaim) at trial is regulated by Supreme Court Rules (“SCR”) r 52.05. (The rule is recited in pt 5 of these reasons). The effect of the English equivalent of this rule was explained by Chitty LJ:
“The principle of the rule is plain. It is that after the proceedings have reached a certain stage [namely trial] the plaintiff who has brought his adversary into court, shall not be able to escape by a side door and avoid the contest. He is then to be no longer dominus litis, and it is for the judge to say whether the action shall be discontinued or not and upon what terms”
…
“The substance of the provision is that, after a stage of the action has been reached at which the adversaries are meeting face to face, it shall only be in the discretion of the judge whether the plaintiff shall be allowed to withdraw from the action so as to retain the right of bringing another action for the same subject-matter.”
(Fox v Star Newspaper Company Ltd (1898) 1 QB 636 at 639).
The District Court Judge noted the terms of SCR 52.05 and resorted to the transcript of the hearing of the first action to ascertain what had transpired. However, His Honour did not seek to resolve the question as to the legal consequences attaching to the defendants’ announcement by counsel in circumstances where the parties have thereafter omitted to seek a formal discharge of the abandoned counterclaim when final orders were being framed.
The absence of that formal step has given rise to argument upon this appeal. In describing the defendants’ announcement as a “withdrawal”, the District Court Judge expressly said that he was using a “neutral term”. His Honour noted the absence of an order authorising discontinuance; he also remarked that there was “certainly no order that [treats] the defendants’ counsel’s intimation as a discontinuance of the counterclaim [having] the effect of a final judgment”.
(b) The Second Action
Having enforced its security by selling the defendants’ real estate, the Credit Union has now brought the present proceedings in the District Court (Action 643 of 1999) claiming the shortfall in the amount recovered upon realisation of the mortgage security (together with interest and costs as provided in the loan agreement and mortgage). These proceedings (called the second action) have been defended and there is also a counterclaim for damages based on an allegation of misleading and deceptive conduct and the making of false representations by the Credit Union’s manager at the time when the loan agreement was being negotiated and when default notices were served on the defendants. The counterclaim in the second action reproduces the defendants’ factual complaint in the first action although expressed in a slightly different way.
When the second action came to trial in the District Court the plaintiff contended that the defendants’ counterclaim should be dismissed on the grounds:
1.   That its subject matter is res judicata, or the issues it raises have been tried and resolved, by the proceedings and the judgment in the Supreme Court.
2.   That the principles in Anshun’s case dictate that the defendants should not be permitted to proceed with it.
3.   That the plaintiff having relied to its detriment upon the defendants’ abandonment of the counterclaim in the Supreme Court proceedings the defendants are estopped from now maintaining their counterclaim in this court.
These issues which were raised upon the pleadings were then treated as preliminary points for determination at trial.
3 The decision in the second action – now under appeal
The District Court Judge decided against the plaintiff with respect to the abovementioned grounds Nos 1 and 3 (and upon this appeal they are not the subject of a contrary contention by the respondent). However, the District Court Judge upheld the plaintiff’s contention with respect to point No. 2 (the Anshun issue) which gives rise to this appeal.
The essence of the District Court’s decision on the “Anshun issue” was that:
(a) the awarding of damages to the defendant in the second action would not be “inconsistent” with the rights of the plaintiff which were established in the first action.
but
(b) In the absence of special circumstances it was unreasonable for the defendants not to pursue their claim of misrepresentation in the first proceedings in circumstances where the misrepresentation was both the foundation for the claim for rectification in the first proceedings and the basis of the counterclaim in the second proceedings. (His Honour also considered what might constitute “special circumstances” and found that, as relevant, there were none).
An extract from His Honour’s reasons is as follows at par 53:
“The defendants had available to them in the first proceeding the very claim, alleged conduct by the plaintiff in breach of the Trade Practices Act and the Fair Trading Act, a curial investigation of which was in my opinion intimately related to the plaintiff’s claim against them; a determination of the defendants’ claim either for them or against them would have ensured finality of litigation (Anshun at 609 per Brennan J and Bryant at 299) and preserved “the orderly administration of justice” (Anshun at 605 per Murphy J) two principles upon which Anshun proceeds. The defendants were faced with the plaintiff’s action for possession of the property they had mortgaged to the plaintiff which if successful would no doubt be followed by the sale of the property. The defendants set up a counterclaim, in advancing which they clearly recognised what in my view was obvious namely the reasonableness, if not indeed the necessity, of putting before the Court the matters they complained about as an integral part of the very transaction upon which the plaintiff founded its action - the contract of loan and the mortgage given to secure the defendants’ obligation under that contract. In my opinion it would have been unreasonable for the defendants to not put before the Court their claims that the alleged representations were made. I do not accept the submission that, analogous to the separate steps taken by the bank in Boles, the defendants would have been reasonably justified in confining their challenge to the plaintiff’s case to the proper interpretation of the contract of loan and being silent concerning their case of the conduct by the plaintiff in breach of the Trade Practices Act or the Fair Trading Act when that conduct was not by any test peripheral to or remote from the plaintiff’s claim. That the defendants did plead that alleged conduct is testament in my view to the incongruity of the position they now adopt that it would not have been unreasonable to fail to advance that case and it was not unreasonable to withdraw it. In my opinion the matter now relied upon was so relevant to the subject matter of the proceedings before the Supreme Court that it was unreasonable for the defendants not to rely on it.”
[see Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 and Boles & Ors v Esanda Finance Corp Ltd (1989-90) 18 NSWLR 666].
The Trial Judge ordered that par 3 of the defence in the second action be struck out and that the counterclaim in that action be dismissed. (Extracts from the pleadings are recited below).
4 The defendants’ complaint in each action
In part 7 of these reasons I have recited the text of a proviso to the standard form loan agreement which was used. It is poorly expressed. It is apparently intended to regulate how the borrowers’ position might be adjusted upon a variation in general interest rates. This obscure clause together with oral explanations allegedly given to the borrowers, provide the foundation of the defendants’ case.

The gravamen of the defendants’ complaint in each action is that their variable interest “home equity loan” was represented by the plaintiff as being for a fixed term of 20 years (so that the defendants would be entitled to receive credit against their periodic loan repayments as interest rates fell).
This complaint is reflected in paragraph 3 of the defence to the second action and also in the counterclaim. Subject to some slight refinement of language it substantially reproduced the allegations which are to be found in the defence to the first action and as providing the basis for a counterclaim seeking rectification in that action. The fact of these repetitive claims was pleaded by the plaintiff in the reply which it delivered in the second action. The District Court Judge concluded that in each action the defendants rely upon the “same transaction” and he held that the substance of the defendants’ claims are in each case the same.
In the second action, the defence (par 3) and the counterclaim (par 16) alleged:
“3.…At or about the time the said Loan contract was executed by the Defendants they had consulted a Mr Andrew Pierson, the then Loans Manager for the Plaintiff at its Light Square, Adelaide premises who represented to the Defendants that the loan would be a “home equity loan” which in effect meant that the Defendants could draw on any credit available up to and including the full amount of the loan at any time during the term of the loan and that while the loan account was in sufficient credit the Defendants could rely on available credit on the account to meet any payment instalments due and payable and that this would be the case throughout the term of the loan and that no breach of the loan agreement would have occurred provided that all monies due and payable pursuant to the said Loan Contract were paid at the expiration of the twenty year term of the said Loan Contract.”
“16.By reason of the matters pleaded in paragraph 3 of the Defendants’ Defence and by reason of the Plaintiff making known to the Defendants at the time of serving the [default] notices referred to in paragraph 9 of the Plaintiff’s Statement of Claim that the Plaintiff’s position was that the term of the loan was variable and not for a fixed term of twenty years, the Plaintiff has
16.1 engaged in misleading and deceptive conduct in trade or commerce in breach of section 52 of the Trade Practices Act and Section 56 of the Fair Trading Act.
16.2 made false representations with respect to the supply of services (in this case credit) in breach of section 53 of the Trade Practices Act and Section 58 of the Fair Trading Act.”
This pleading is to be compared with the corresponding paragraphs 3 and 13 of the defence and counterclaim in the first action:
“3.…At or about the time the written document was executed by the defendants they had consulted a Mr Andrew Pierson (Mr Pierson), the then Loans Manager for the plaintiff at its Light Square, Adelaide premises who advised the defendants that the loan would be a “home equity loan” which terms would be a term of twenty years with the then current interest rate of 1.063% per month on monthly rests which would vary from time to time at the discretion of the plaintiff in accordance with market movements. At the current interest rate of 1.063% as at February 1992, Mr Pierson advised the defendants that the monthly instalments would be $2,327.00 based upon a twenty year term of loan.”
…
“[The defendants say that the Credit Union] would from time to time after the date of the advance of the principle, vary the interest rate and monthly instalments due in accordance with market movements….”
The defendants would pay based upon the principle advance of $208,000, an initial interest rate of 1.063% and a term of loan of twenty years and an initial monthly instalment of $2,327.00 commencing on the 12^th March 1992. Monthly payments of principle and interest would vary (but not the term of the loan) in accordance with the variation of the interest rates…”
“13.If the written document does provide that the term of the loan can be varied by the plaintiff (which is denied) then by reason of the matters pleaded in paragraph 3 and by reason of the plaintiff making known to the defendants at the time of serving the [default] notices referred to in paragraph 9 of the claim that [it was] of the view that the term of the loan was variable and not fixed for 20 years, the plaintiff has
13.1 engaged in misleading and deceptive conduct in trade or commerce in breach of Section 52 of the Trade Practices Act and Section 56 of the Fair Trading Act.
13.2 made false representations in connection with the supply of goods (credit) in breach of Section 53 of the Trade Practices Act and Section 58 of the Fair Trading Act.
13.3 engaged in misleading conduct in relation to goods (credit) in breach of Section 55 of the Trade Practices Act and Section 63 of the Fair Trading Act.”
The defendants as appellants now complain that by the decision of the District Court Judge they have been precluded from prosecuting their counterclaim in the second action.
5 The abandonment of the first counterclaim and its legal effect
The appellants argue that their right to counterclaim in this action has been impliedly reserved by reason of the treatment accorded to the counterclaim in the first action. If it be the case that despite the abandonment of the counterclaim, the defendants retained the right to bring fresh proceedings, then it is arguable that the reservation of that right is a circumstance (whether standing alone or with other factors) which might justify the defendants in reviving their complaints in the second action.
The Master’s order of 28 April 1998 is in common form and does not mention the abandoned counterclaim; it recites the fact of a trial on 17 and 18 August 1998 and requires the defendants to deliver up possession of land subject to being entitled to redelivery of possession in the event of the monies due under the mortgage being paid; the order also reserves liberty to the parties to apply. One might have expected the formal record to dispose of the counterclaim. It does not.
In these circumstances the District Court Judge was taken to the transcript of proceedings before the Master to establish what happened; the transcript is before us on this appeal.
Counsel’s announcement to the Master on 18 August 1998 is to be found in the following exchange at p 98:
“MR LANE (of counsel for the defendants): Before my learned friend commences, there are two matters which I mentioned to her and I raise with you. The first is we will not be pursuing our counterclaim in terms of rectification. You know that it was in the nature of a fall back position anyway and we are not pursuing it.
HIS HONOUR:          Thank you for that intimation. What then remains the thrust of your case, if you can just put it in a couple of sentences?
MR LANE:The contract was for a fixed term but we were not in arrears.
HIS HONOUR:          So the ordinary reading of the contract brings about that result as a matter of proper construction of it.
MR LANE:Yes, and to the extent that there is any ambiguity and the mere fact that there is a difference of interpretation might of itself tend to suggest there is some ambiguity, then it may be that you can have regard to some parole evidence.
HIS HONOUR: There was some mention of the Trade Practices Act and the Fair Trading Act.
MR LANE:That was for the purposes of the rectification.
HIS HONOUR:          That’s in the pleading. You are not pursuing that?
MR LANE:No.”
and later:
“HIS HONOUR:        Do you see the need at the moment – perhaps I better ask you at the end of the plaintiff’s case – as to whether you are going to go into evidence?
MR LANE:We probably will because the issue of whether or not you are entitled to have regard to parole evidence hasn’t really been determined and I wouldn’t want my clients to be in a position where you ruled that you needed to and were entitled to have regard to parole evidence and we hadn’t lead any.
HIS HONOUR:          Indeed.
MR LANE:So out of abundant caution – I am not inviting you to do so, but absent you saying ‘I will interpret this document on its face without regard to parole evidence’, then we would call evidence.
HIS HONOUR:          It depends on what you want me to do. That’s one of the courses that are open to me and that’s immediately apparent to me from what you have just announced if you’re not pursuing rectification, then I would’ve thought that most, if not all of the evidence that was taken yesterday, may be inadmissible.
MR LANE:No. My friend wanted to, and she is entitled to, keep her options open and it would be admissible as parole evidence being extrinsic evidence surrounding the formation of the contract, and relevant to that. Clearly.
HIS HONOUR:          In other words as you indicated, if there was an ambiguity either latent or patent in the contract, then parole evidence may be called in order to cast some light upon that ambiguity.
MR LANE:Yes, and we understood that evidence was being lead yesterday for that purpose, and that was consistent with my learned friend’s opening. We cross-examined on that basis. It may be that it would’ve also gone to rectification, we are not questioning that, but it was clearly designed to provide some extrinsic evidence surrounding the contract.”
As the Master and the parties thereafter ignored the counterclaim, the appellants now contend that it is to be inferred that the counterclaim was discontinued by leave and without terms being imposed. The appellants contend that as a result their right to bring a further action has been reserved.
Counsel for the respondent points out that the appellants’ present argument as to the application of SCR 52.05 is a new argument upon appeal. Nevertheless, in my view, the argument is available and must be considered.
Supreme Court Rule 52 reads as follows:
“52.01      A plaintiff may at any time before the making of the order that the action proceed to trial, discontinue his claim, either wholly or in part, against a defendant. After that time a plaintiff may discontinue only with the leave of the Court, or with the written consent of all parties filed in the Court.
52.02        A party raising any matter in a statement of claim, defence or subsequent pleading may withdraw that matter at any time on written notice to the other parties. This Rule does not enable a party to withdraw without the leave of the Court or the consent of the other party, an admission or any other matter operating for the benefit of that other party.
52.03        Unless the Court otherwise orders or the parties consent, the party discontinuing or withdrawing shall pay the costs up until the date of delivery of the notice, of the party against whom the claim or defence was discontinued or withdrawn. No further order shall be required to enable the party against whom the claim or defence was discontinued to tax his costs.
52.04        A discontinuance or withdrawal shall be made by filing, and forthwith serving on all other parties, a notice stating the extent of the discontinuance or withdrawal.
52.05        The discontinuance of an action before trial shall not be a defence to any subsequent action for the same, or substantially the same, cause of action, provided that the costs of the previous action have been paid. If the costs have not been paid, the subsequent action may be stayed until payment. If an action is discontinued at trial the Court may direct that the discontinuance have the effect of a final judgment against the party discontinuing.”
The appellants contend that the Master allowed them to discontinue without any terms being imposed. Expressed another way, the appellants argue, in effect, that with the Master’s approval they have informally elected to be nonsuited upon the basis of a discontinuance under SCR 52.05.
However, the procedure of nonsuit is not now available in the Supreme Court. In Millbank v Price [1954] SASR 166 Ligertwood J traced the history of nonsuit; in Jones v Dunkel & Anor (1959-60) 101 CLR 298 at 323-331, Windeyer J undertook a similar review. It is sufficient now to note that formerly the plaintiff in a common law action could elect to be nonsuited at any time before verdict and a party to proceedings in equity could have his bill dismissed at any time before trial. This right has now been abrogated by the Rules of Court. Discontinuance of an action is to be distinguished from withdrawal of an allegation or of a claim to relief.
In upholding the views of Chitty LJ in the Court of Appeal in Fox v Star Newspaper Company (which I have already cited) Lord Halsbury in that same case on behalf of the House of Lords said:
“Our whole system has been changed, and I think the reason why the word “nonsuit” itself is not now to be found in the rules is that it was determined that the power of a plaintiff at the common law to claim a nonsuit, or the plaintiff in equity to dismiss his bill at his own option, should no longer be permitted, and it is probable that the word “discontinuance” was supposed to apply to both forms of procedure both at common law and in equity. Accordingly by Order XXVI, r 1, the only mode by which a plaintiff can submit to defeat is under that Order, unless he allows the proceedings to go on until the verdict is recorded against him.
The word “discontinuance” no doubt had, under a former system, the more limited application, and the old system of nonsuit is manifestly no longer capable of being reconciled with the new procedure either in form or substance. The substance is that when it once comes into court, and when the plaintiff offers no support to his action, there must be a verdict for the defendant.”
(see Fox v The Star Newspaper Company Ltd [1900] AC 19 at 20).
Subject to any terms imposed by the Court, the fact of discontinuance of an action does not operate so as to provide a defence to a subsequent action for the same or substantially the same cause – see The Owners of the Cargo of the “Kronprinz” v The Owners of the “Kronprinz” (The Ardandhu) (1887) 12 AppCas 256 at 262 per Lord Herschell. However, in giving leave to discontinue, the Court, in the exercise of its discretion, is required to consider whether the plaintiff is to be at liberty to bring a further action (Robertson v Purdey [1906] 2 Ch 615 at 619). In Stahlschmidt v Walford (1878-79) 4 QBD 217, a plaintiff who realised that the action was not going his way, was refused leave to discontinue on the basis that the defendant was “entitled to the fruits of these proceedings” and should not be deprived of “any advantage to which he is fairly and reasonably entitled”.
In the present case, no reason was advanced before the Master as to the defendants’ reasons for abandoning their counterclaim. It may be that the case was not going well; on the other hand there may have been good commercial reasons for postponing an expensive forensic confrontation until the extent of any loss (or profit) be established by sale of the security. I can only speculate; there is nothing which will assist the Court in drawing an inference. However, if there were some good reason for postponing the litigation then one might expect an affidavit by way of explanation. The respondent now asserts that it would have been entitled to the dismissal of the action but did not see the need for such formality.
In my view, it would be a big step now to assume that the Master intended that the defendants could come to Court again with the same claim. On the other hand, there were clearly no terms imposed. It would equally be a big step to assume that the defendants, by abandoning their counterclaim in the first action consented to it being dismissed. Nevertheless at the conclusion of the action before the Master, the appellants could hardly have resisted some form of order if it had been sought (see Emma Silver Mining v Grant cited below). However, the respondent did not make this application. The District Court Judge said at pars 17-18:
“…It is clear from the transcript of the proceedings (and I think this is a case where the transcript may be resorted to) that the defendants having, to use a neutral term, withdrawn the claim of alleged breaches of the Trade Practices Act and the Fair Trading Act the court proceeded to construe the contract of loan as it was written, and the defendants’ withdrawn claim was no part of the court’s judgment – the claim did not merge in the judgment.
It also follows that the issue of the allegations in the defendants’ counterclaim having been withdrawn there was no determination of that issue by the court.”
In my opinion the only fair way of looking at the facts is to conclude (as I do) that the parties, by inadvertence, did not address the problem and failed to clear off the counter claim which, of course, has not been the subject of an adjudication. Upon the face of the proceedings, the counter claim in the first action now lies dormant but it has not been discharged.
The Annual Practice states that where part of a case is abandoned, the defendants are entitled to an order directing actual discontinuance of the abandoned part - citing Emma Silver Mining Co v Grant (1879) 11 Ch D918. That was a case in which the mode of trial was at issue - which is not the present case. Nevertheless there is a useful statement of principle by Jessel MR at 928:
“…But when a Plaintiff has chosen to frame his case in this way, and has chosen to join several Defendants, because they are more or less connected with some part of the subject-matter of the action, although not connected with the whole of it, that is the mode in which he has elected to frame his case for his own convenience, and it does not then at all follow as a matter of course that he is to be at liberty to retire from it as to any portion of the case and say, “I should like to try one part of it only, and to leave the Defendant afterwards to be subject to a second or third trial to try the rest of it.” I think the Defendant has, speaking generally, a right to answer, “You ought to have thought of this before you brought your action or put in your statement of claim; if you wanted any part of the action to be tried separately you should have brought a separate action.””
There is power in SCR r 3.04(f) and r 84.12 which would still enable the Court in the first action to deal with the oversight which appears to have occurred in the formulation of final orders. However, the practice would require that any order which might be made should be one which disposes of the claim rather than one which merely imposes a stay (see Anon [1876] WN 40).
The appellants’ argument upon this appeal concentrates upon the history of the counter claim, but this is overshadowed by the conduct of the defence to the first action which also stands to be considered. In the next section of these reasons I trace the steps which the appellants took in their defence to the first action. Those steps lead me to conclude that the Court in the exercise of its discretion would not now allow discontinuance of the first action without imposing terms which would prevent the subject matter from again being litigated.
A factual complaint has been opened up by the defence to the first action but the complaint has not been addressed by a Court; the counterclaim, adopting the same complaint has been abandoned but has not been the subject of an order. If the Court were required to exercise its powers, it seems clear that the proper exercise of discretion would require that judgment be entered for the Credit Union on the counter claim in the first action if the appellants were unwilling to accept terms.
I therefore am of the opinion that the appellants fail in their contention that there was notionally reserved to Pertsinidis the right to further pursue the complaint which they had abandoned. At least on the first day of the hearing of the first action counsel for Pertsinidis pursued his clients’ complaint with vigour; it was only after the Credit Union’s Manager had been cross-examined that the counterclaim was abandoned. In the absence of any explanation on oath it would therefore be wrong in principle to allow Pertsinidis at a later stage to “escape by a side door and avoid the contest” (see per Chitty J cited above). To the extent that it is now relevant to have regard to the outcome of the first action the Court should proceed upon the basis that Mr and Mrs Pertsinidis were unsuccessful in their claims.
6A party’s obligation to bring forward the “whole case”

It is not suggested that the present case involves “cause of action” estoppel in which the cause which has been litigated merges in the judgment (see Anshun at 597). Rather, the respondent relies upon the “extended principle” expressed in Henderson v Henderson [1843-60] All ER Rep 378 at 381 in the following terms:
“…where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special case, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”
and as explained in Anshun at 602-603 cited above.
Each of these cases is concerned with repetitive claims with respect to the same “subject of litigation” and the identification of the Court’s power to shut out a party from litigating a “cause of action”. However, there appears to be room for doubt as to the proper formulation of the principle to be found in Anshun (see Tanning v O’Brien (supra) at 345 and Chamberlain v Deputy Commissioner of Taxation (1987-88) 164 CLR 502 at 508).
It may be that difficulties are created by differing uses of the expression “cause of action” – which sometimes is used “to mean the facts which support a right to judgment …. sometimes to mean a right which has been infringed …. and sometimes to mean the substance of an action as distinct from its form ….” (see per Deane, Toohey and Gaudron JJ in Chamberlain (supra) at 508 and per Brennan J in Anshun at 611-612). The principle of Henderson requires the parties to bring forward their “whole case” and prevents the parties (except in special circumstances) from again opening “the same subject [matter] of litigation”. If the differing use of language is recognised, then the various statements may be reconciled.
The present appellants have an unadjudicated “cause of action” which, in the narrow sense, is not the subject of an estoppel. On the other hand, in the wider sense the matter of complaint which the defendants have raised in each action (whether by defence or counterclaim) is the same although the relief claimed is different. Indeed, the defendants’ complaint in the second action is only sustainable upon the basis that (as a result of the Master’s interpretation), the loan agreement takes effect contrary to the allegedly misleading representations and in the face of an obscurely worded agreement. If the defendants had chosen in the first instance to present their whole case before the Master, it may be that an order for rectification would have secured satisfaction for the defendants. Relief based on misrepresentations may have become unnecessary.
In Anshun at 609, Brennan J said:
“An action to recover a second judgment giving more copious relief than the relief given by the first judgment cannot be brought merely because the evidence was not properly prepared in the first action (Marriot v Hampton 101 ER 969; Wilson v Ray 113 ER 32) nor merely because some point was omitted from the argument then put to the court (Greathead v Bromley 101 ER 1073). Both public policy and the interests of the litigants require that there should be an end to litigation as to a particular subject matter once a judgment determining the rights and liabilities of the parties as to that matter has been recovered (Lockyer v Ferryman (1877) LR 2 AC 519, at p530).”
(I note the use of the expression “particular subject matter”).
In my view, the task for the court in this case requires a “meticulous scrutiny of its own facts” (see per Kirby P in O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 at 612). The court will be required to identify what properly is to be regarded as “belonging” to the subject of the first action. In undertaking this exercise and after deciding how far the cause really extends, the court as necessary will then determine whether special circumstances required the non-application of the general rule in the interests of justice. Some factors which might be relevant to that exercise were identified in the Full Supreme Court of Victoria in Port of Melbourne Authority v Anshun (No 2) [1981] VR 81 at 89-90; one matter of possible relevance may be the “disproportion” between the claims made in the successive actions. Consistent with this approach it seems to me to be at least arguable in the present case that there may be some “disproportion” in requiring the defendants to pursue a claim in the first action without then knowing whether commercially the point is worth pursuing.
In the present case the appellants have not provided an explanation for their failure to pursue the outstanding questions in the earlier proceedings. Likewise (as the transcript shows) no explanation was offered to the Master for limiting the contest. If the defendants were intent upon salvaging what they could when the tide was running against them, then they should not be allowed a second chance. On the other hand, if there was, in fact, a common sense commercial justification to wait then that fact could be the subject of evidence. No such explanation has been forthcoming. In some cases the justification for a party’s action will be patent; in my opinion the justification for Pertsinidis’ conduct in twice raising the same complaint appears from part 8 of these reasons.
7An ambiguity in the loan contract – The ‘Subject of Litigation” identified.
The loan agreement between the parties provided (by reference to the items of a schedule) that “the Borrower will repay… the principal together with interest at the rate set forth in item C hereof at the times and in [the] manner set forth in item D…” The particulars in the schedule provide (in item C) for “an interest rate of 1.063% per month (with monthly rests)” and (in item D) for “monthly instalments of $2327 commencing on 12 March 1992 and continuing until the principal and all interest thereon is paid.
If there were nothing further in the agreement it would be a typical credit foncier loan agreement based on a twenty year term. (This period is not mentioned on the face of the loan but can be ascertained by calculation).
However the agreement contained a proviso to the terms which I have recited as regards repayment:
“PROVIDED that the Credit Union may at any time and from time to time and whether before or after the date of the advance of the principal by written notice to the Borrower increase or reduce the rate of interest to be paid hereunder and if necessary and in the absolute and unfettered discretion of the Credit Union vary the amount of the periodic instalments referred to in Item D hereof accordingly.”
It seems to be at least arguable that something has gone wrong in the drafting of the proviso and in particular in the use of the expression “if necessary”. Wicks J (who dealt with the matter upon appeal from the Master) described the expression as being “vague and is negated by what follows”. Indeed upon one view, the proviso would appear to give the Credit Union as lender, a right to vary the interest rate but with some consequential alteration in the periodic instalments (if one gives effect to the word “accordingly” in the proviso). Arguably, the circumstances giving rise to commercial necessity might be identifiable with the benefit of extrinsic evidence.
The material upon which the Master (and later Wicks J) might have acted with respect to the defendants’ case is identified in par 3 of the defence in the first action. Apparently it is the same material upon which the defendants also relied for the purpose of a formal claim for rectification in the first action, and then in the second action for relief under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (SA) (see pars 3 and 16 of defence and counterclaim in second action).
Having opened up for the purposes of the first action the circumstances in which the loan agreement was made, the question is whether the defendants were obliged to bring before the Court the whole of their case (whatever it may be). The counter claim in the second action contains allegations as to misleading conduct which arise out of the same facts as provide the matrix of facts relevant to the construction question (and the notional rectification which might have been undertaken in the course of that exercise). I note that the defendants appear to have shifted ground slightly with their factual allegations as between the two actions but in my view nothing now turns on any such discrepancy.
The full extent of the “subject of litigation” in the first action may now be identified for the purpose of considering the application of the Anshun principle.
8 The application of Anshun to the present case
In s 4 of these reasons and by reference to the pleadings I identified the common factual complaint which Mr and Mrs Pertsinidis have made in each of the two successive actions alleging misleading conduct within pt V of the Trade Practices Act. The relief which they have claimed in each action is different. Nevertheless their cause of action in each instance arises out of information given to them by the Credit Union as to how its home equity loan supposedly operated.
In the first action, (having alleged misleading conduct) Pertsinidis sought an order rectifying the loan contract; I take this to be a claim for relief under s 87(1A) and s 87.2(b) of the Trade Practices Act or alternatively for similar relief under s 85(1) and s 85(5)(c) of the Fair Trading Act.
In the second action, having alleged this same misleading conduct Pertsinidis’ seek damages pursuant to s 82(1) of the Trade Practices Act or s 84(1) of the Fair Trading Act.
Relevant extracts from pt VI of the Trade Practices Act are as follows:
“82(1)A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”
“87(1A)Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA, IVB or V or on the application of the Commission in accordance with subsection (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.”
“87(1C)An application may be made under subsection (1A) in relation to a contravention of Part IVA, IVB or V notwithstanding that a proceeding has not been instituted under another provision of this Part in relation to that contravention.”
“87(2)The orders referred to in subsection (1) and (1A) are:
…
(b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified.”
The Trade Practices Act draws a distinction between loss or damage under s 82 and the likelihood (or contingency) of loss or damage which may be prevented or reduced under s 87 (see Wardley Australia v State of Western Australia (1992) 175 CLR 514 at 527). As loss or damage is essential under s 82, the cause of action does not accrue until actual loss or damage is sustained (see Wardley at 525). Prospective loss is not enough to found such an action. However that loss or damage must have come about “by” conduct which contravenes the Trade Practices Act. In a case such as the present if loss or damage does accrue Mr and Mrs Pertsinidis will be “entitled to recover a sum representing the prejudice or disadvantage which they have suffered in consequence of altering their position under the inducement of the misleading conduct” (see Wardley at 526).
With respect to this type of economic loss or damage Mason CJ Dawson, Gaudron and McHugh JJ in Wardley said at 527:
“When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of “loss or damage”. And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of undercompensation or overcompensation, the risk of the former being the greater.”
and at 533:
“…It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be, incurred. Moreover, the plaintiff will run the risk that damages will be estimated on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered. These practical consequences which would follow from an adoption of the view for which the appellants contend outweigh the strength of the argument that the principle applicable to the cases in which the plaintiff acquires property (or a chose in action) should be extended to cases where an agreement subjects the plaintiff to a contingent loss. In such cases, it is fair and sensible to say that the plaintiff does not incur loss until the contingency is fulfilled.”
Section 87 of the Act empowers the Court to make orders which will prevent or reduce actual loss or damage (see per Deane J in Wardley at 543-544).
It may thus be seen that in the present case the bringing of an action to vary the loan contract may be treated as a step taken in accordance with s 87 of the Trade Practices Act in order to prevent actual damage which may be anticipated to arise from a particular contravention of s 52 and other provisions of Part V of the Act. The Trade Practices Act s 87(1C) specifically authorises an application for relief being made under s 87(1A) independently of any other proceedings. It is therefore to be expected that, acting reasonably, a person entitled to the protection of pt V and VI of the Trade Practices Act may wish to take action to prevent a prospective loss before bringing an action if and when actual loss or damage is suffered.
In Sent & Anor v Jet Corp of Australia Pty Ltd (1986) 160 CLR 540 the High Court decided that an application under s 87(1A) of the Trade Practices Act must be ancillary to proceedings brought under other provisions of the Part. The effect of that decision has now been reversed by s 87(1C) which (as now relevant) was introduced by the amending act no 168 of 1986 - see schedule 1.
The attention of the Trial Judge does not appear to have been directed in the present case to the effect of s 87(1C) which is crucial to the outcome of this appeal.
The provisions of the Fair Trading Act remain to be examined. They are expressed in somewhat different language from the corresponding provisions in the Trade Practices Ac. Relevant extracts from the Fair Trading Act are:
“84(1)A person who suffers loss or damage by conduct of another in contravention of a provision of Part 10 (other than section 57) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”
“85(1)If in proceedings under this Act the Supreme Court or the District Court is satisfied that a person has suffered, or is likely to suffer, loss or damage by reason of a contravention of this Act, then whether or not any other order is made or relief granted in those proceedings, the Court may, for the purpose of compensating that person or preventing or reducing the extent of the loss or damage, make orders under this section against the person who committed the contravention or a person involved in the contravention.”
“85(2)Whether or not other proceedings have been instituted under this Act in relation to a contravention of this Act, the Supreme Court may-
(a)on the application of a person who has suffered, or is likely to suffer, loss or damage by reason of the contravention; or
…
make orders under this section, for the purpose of compensating such a person or preventing or reducing the extent of the loss or damage, against the person who committed the contravention or a person involved in the contravention.”
“85(5)The orders that may be made under this section are of the following kinds:
…
(c)an order for the variation of a contract or instrument (including a contract or instrument relating to real property);”
It seems to me that the opening phrase of s 85(2) of the Fair Trading Act mirrors (at least as now relevant) the effect of s 87(1C) of the Trade Practices Act. In my opinion these sections respectively provide the mandate for Pertsinidis to bring forward different claims at different times. In other respects the observations which I have assembled with respect to the Trade Practices Act appear to me to be applicable (mutatis mutandis) with respect to the construction of the Fair Trading Act.
As a result of this review I reach the following conclusions:
(1)Pertsinidis’ were entitled to bring proceedings in the first action with a view to varying the contract so as to prevent loss or damage. The Trade Practices Act specifically authorised such action without there being coupled with it a claim in respect of anticipated loss or damage. The Fair Trading Act is to the same effect.
(2)As an order for rectification of the contract in this case arguably would avoid actual loss or damage, there are policy reasons why a litigant before actual loss or damage occurs should not be discouraged from promptly taking steps to secure rectification (even although Pertsinidis must now be taken to have been entirely unsuccessful in that litigation). Therefore even without s 87(1C) of the Trade Practices Act and s 85(2) of the Fair Trading Act there are reasons why Pertsinidis should be allowed to bring successive claims in the peculiar circumstances of the present case.
(3)The Credit Union (as I observed in Part 1 of these reasons) was entitled to bring successive claims and that in itself created a special situation. The defence to first action put in issue the meaning of the loan contract and required the parties to address the possibility that extrinsic evidence might be called in aid to resolve an ambiguity. Although the Court confined itself to the language of the document the parties had to be prepared to address the background matrix of facts if required so to do At that stage Pertsinidis could not have brought forward a claim for a prospective loss as the damage had not then accrued. Any claim for such loss or damage is properly brought forward against the Credit Union’s claim in the second action.

In the result it is my opinion that for the purposes of the rule in Henderson, and in Anshun Mr and Mrs Pertsinidis did bring forward their “whole case” at the appropriate time. In fact two independent “subjects of litigation” can be identified which Pertsinidis were entitled to bring forward separately in the two actions. An alternative way of looking at the matter is to say that there are “special circumstances” within the Henderson rule which justifies the “subject of litigation” being divided between the two actions in the manner which has occurred. Therefore, in my opinion the Trial Judge was wrong in his conclusion that the material relied upon by Pertsinidis in the second action was “so relevant” to the subject matter of the first action that “it was unreasonable for the defendants not to rely on it.”
9 Conclusion
In my opinion the appeal by the defendants Pertsinidis should be allowed; par 2 of the order of the District Court dated 19 January 2001 and the order of the District Court dated 1 March 2001 should be set aside; the action should be remitted to the District Court for retrial.
MARTIN J. For the reasons given by the Chief Justice, I agree that the appeal should be allowed and that the Court should make the orders proposed by Williams J.

[2001] SASC 244

19 July 2001