Politarhis v Westpac Banking Corporation - [2009] SASC 96

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
POLITARHIS & ANOR v WESTPAC BANKING CORPORATION
[2009] SASC 96
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Sulan and The Honourable Justice Vanstone)
14 April 2009
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE - SPECIAL RELATIONSHIPS AND DUTIES - BANKS
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - WHERE NERVOUS SHOCK OR MENTAL DISORDER - COMMON LAW
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - WHERE ECONOMIC OR FINANCIAL LOSS - CARELESS ACTS OR OMISSIONS
Respondent bank provided a loan by way of a line of credit to the appellants - bank not aware that first appellant a problem gambler - funds available through line of credit quickly dissipated by first appellant by gambling - appellants sought an increase in the limit on the line of credit - bank agreed to increase limit on the line of credit by establishing a new account with a greater limit and crediting the old account with an amount from the new account sufficient to extinguish debit balance to enable the bank to close the old account - bank established the new account but did not apply funds to the old account, and did not close the old account - effect of the bank's mistake was that significantly more funds were available to the appellants than was intended - first appellant realised the error made by the bank and quickly dissipated funds by gambling - first appellant claimed damages representing psychological and psychiatric conditions suffered by him, namely: pathological gambling, cannabis addiction, depression and anxiety - first appellant further claimed damages representing amounts lost through gambling - first appellant's losses alleged to have been caused by provision of credit in excess of that which was intended - second appellant claimed damages representing financial loss and psychiatric injury - second appellant's losses alleged to have been caused by the first appellant's gambling, which was allegedly caused by the bank's mistake - single Judge rejected appellants' claims - single Judge ordered that appellants give possession of their residential property to the bank to facilitate the sale of the property pursuant to a mortgage - appeal to Full Court against decision of single Judge.
Held: Not reasonably foreseeable that if the bank were to lend a large amount of money to the appellants, the first appellant would become a compulsive gambler - no duty of care owed by the bank to avoid causing first appellant to develop a psychiatric injury or illness - duty should not be imposed on a lender of money requiring it to take reasonable care to avoid lending money to a person who might use the money in a manner that causes injury to that person - the bank did not owe a duty to take reasonable care to avoid causing financial loss to first appellant by lending money to him in circumstances in which it was foreseeable that first appellant would lose the money by gambling - duty of care would seldom arise absent knowledge on the part of the bank that the borrower had a gambling problem - no duty owed to second appellant to take reasonable care not to cause her psychiatric injury or financial loss by making available to first appellant more than the amount that was intended - no breach of contract on the part of the bank - no error in the Judge making the order for possession - appeal dismissed.
Workers Rehabilitation and Compensation Act 1986 (SA); Limitation of Actions Act 1936 (SA) s 35, s 36, s 36(1a), s 45, s 48(1), s 48(3), referred to.
Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43, applied.
Politarhis v Westpac Banking Corporation; Politarhis v Australian Central Credit Union Ltd [2008] SASC 296; Perre v Apand Pty Ltd (1999) 198 CLR 180; Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; Cole v South Tweed Heads Rugby League Football Club Limited (2004) 217 CLR 469; Roads and Traffic Authority of New South Wales v Dederer (2007) 234 CLR 330, discussed.

POLITARHIS & ANOR v WESTPAC BANKING CORPORATION
[2009] SASC 96
Full Court: Doyle CJ, Sulan and Vanstone JJ

DOYLE CJ: In December 2003 Westpac Banking Corporation (“Westpac”) entered into a loan agreement with Mr and Mrs Politarhis. Westpac agreed to advance to Mr and Mrs Politarhis an amount not exceeding $198,000.
At that time, Mr and Mrs Politarhis had an existing “line of credit”, as it was called, limited to $180,000 (“the first loan”). The line of credit was made available to them by Westpac under a loan agreement made in April 2003. The limit on the line of credit was reached in July 2003. The first loan was secured by a mortgage over a house property owned by Mr and Mrs Politarhis.
The loan agreement between Mr and Mrs Politarhis and Westpac made in December 2003 (“the second loan”) stated that the loan was secured by the existing mortgage over the house property. It also provided that the loan was to be applied in the first place to repaying the amount due to Westpac under the first loan. Bearing in mind that the balance owing under the first loan was $180,000, in effect the second loan enabled Mr and Mrs Politarhis to borrow or draw down a further $18,000, at which point the limit of $198,000 would be reached.
Due to a mistake on the part of Westpac, Westpac failed to apply the second loan in reduction of the existing indebtedness of $180,000. Westpac mistakenly acted as if the second loan was for an amount of $198,000, in addition to the existing indebtedness under the first loan.
Mr Politarhis was a habitual gambler, and had been for some years. He realised in late December 2003 that Westpac was mistakenly treating the second loan as entitling him and his wife to draw down a further $198,000. Mr Politarhis did not tell Westpac or his wife about the mistake. He began to draw on the new line of credit for gambling purposes. By 29 March 2004 he had withdrawn and gambled, or spent in other ways, $153,520.81. On that day he told Westpac about the mistake. Westpac “froze” each of the loan accounts.
Thereafter, over some time, Westpac made demands for repayment of all monies owing in respect of each loan. Westpac threatened to enforce the mortgage over the house property, and to sell the house. There were negotiations between Mr and Mrs Politarhis and Westpac, but in the end they came to nothing.
In March 2007 Mr Politarhis instituted the present proceedings. Mr Politarhis has represented himself throughout. The legal basis of his claim is not made clear. He claimed damages from Westpac. He claimed damages on the grounds that by extending credit as Westpac did, by mistake, Westpac caused him a psychiatric injury or a mental injury. He claimed that the availability of money in excess of the $18,000 caused him to gamble substantial amounts of money, and that this caused his gambling habit to become pathological or uncontrollable, and that in addition it led to addiction to cannabis, to depression and to suicidal tendencies with other adverse effects on his health. Alternatively, the availability of the money led to an exacerbation of “a chronic debilitating and simmering gambling addiction/dependence/illness”: Statement of Claim paragraph 2. He also claimed from Westpac damages for the losses that he suffered through gambling.
The primary argument advanced by Mr Politarhis appears to be that while he is liable to repay to Westpac the amount of $180,000 advanced under the first loan, he should not be liable for the amount mistakenly advanced under the second loan, except, perhaps, to the extent of $18,000.
Westpac brought a cross-action against Mr and Mrs Politarhis. It claimed that the amount advanced under the second loan agreement, together with interest, was due and owing to Westpac and was secured by the mortgage granted by Mr and Mrs Politarhis in connection with the first loan. Westpac claimed that the failure to pay the balance owing under the second loan agreement was a default under the mortgage, and accordingly claimed an order for possession of the house property to facilitate its sale.
Mrs Politarhis brought a cross-action in response to the cross-action by Westpac. She claimed damages. She alleged that she had suffered adverse effects to her health as a result of the gambling by Mr Politarhis, and that her home had been put at risk because of that same conduct, all of which she alleged was attributable to Westpac’s error in allowing Mr Politarhis to draw down on the second loan to the extent that it did.
The Judge dismissed the action by Mr Politarhis. He also dismissed the cross-action by Mrs Politarhis. He made orders in favour of Westpac against Mr and Mrs Politarhis for the possession of their house.
Mr and Mrs Politarhis now appeal against those orders.
Mr and Mrs Politarhis represented themselves at the hearing of the appeal.
The case is a tragic one. There is no doubt that Mr Politarhis’ addiction to gambling has had devastating consequences for him, and for his wife and children, who are innocent bystanders. Equally, there is no doubt that the mistake made by Westpac enabled Mr Politarhis to squander a large amount of money. But I agree with the Judge that the claims by Mr Politarhis and Mrs Politarhis must be dismissed. I also agree that Westpac is entitled to an order for possession of the house property. Before explaining why the claims by Mr Politarhis and Mrs Politarhis must fail, it is necessary to outline the circumstances giving rise to the claim, and also to summarise the Judge’s findings of fact.
The background to the claim
I begin by outlining the circumstances under which Mr and Mrs Politarhis came to borrow money from Westpac. For these purposes, I draw on the trial Judge’s reasons: Politarhis v Westpac Banking Corporation; Politarhis v Australian Central Credit Union Ltd [2008] SASC 296. Little of this background is contentious, although there are some aspects that are contentious.
Mr Politarhis is now 53 years of age. For most of his adult life he has had steady employment. In late 1992 he suffered what appears to have been a significant neck injury, for which he was paid compensation under the Workers Rehabilitation and Compensation Act 1986 (SA). Between then and July 1995, when his employment was terminated, there were times when Mr Politarhis was absent from work, for reasons linked to the neck injury.
Mr Politarhis was unemployed between July 1995 and October 1996. He then obtained new employment, remaining employed until April 2004. The Judge noted that this period of employment was marked by periods of absence from work associated with Mr Politarhis’ gambling habit.
Mr Politarhis has not had paid employment since April 2004. He has been receiving a Disability Pension since October 2004.
In October 1993 Mr and Mrs Politarhis became members of Australian Central Credit Union Ltd (“ACCU”). In October 1993 they borrowed $22,000 from ACCU for “debt consolidation and home improvements”. The loan was secured by a mortgage over their house property.
In January 1998 they borrowed a further amount from ACCU.
In May 1999 Mr and Mrs Politarhis entered into an agreement with ACCU for a “line of credit” of $35,000. Mr Politarhis was familiar with this kind of borrowing, because for a time he had been employed in selling financial products of this kind. The previous loans by ACCU had been standard principal and interest loans. This was an interest only loan. By October 1999 the credit limit of $35,000 had been reached.
In December 1999 ACCU agreed to increase the limit to $55,000. That limit was reached in January 2000. ACCU then refused to increase the limit: at [23].
In late February 2000 Mr and Mrs Politarhis entered into a loan agreement with Savings and Loans Credit Union (“SLCU”).
This was for a new line of credit limited to $90,000. From that amount about $55,000 was paid to ACCU to discharge the debt owing to ACCU. The mortgage over the house property held by ACCU was discharged, and SLCU took a mortgage over the property: at [24].
By mistake ACCU failed to remove or to terminate the credit limit of $55,000. Mr Politarhis soon realised that ACCU had made a mistake. He did not tell Mrs Politarhis or ACCU. Between March 2000 and May 2000 Mr Politarhis withdrew about $50,000, most of which he lost by gambling: at [27].
Mr Politarhis gave evidence that when he drew on the line of credit mistakenly made available by ACCU, he could not control his irresistible urge to gamble: at [46].
During the period between March and May 2000 his mental state deteriorated. He had consulted a financial counsellor in early 2000: at [28]. In April 2000 Mr Politarhis was admitted to Flinders Medical Centre following a drug overdose: at [47]. He was there diagnosed as suffering from depression associated with his gambling. Mr Politarhis told the Judge that at this time his gambling was compulsive and uncontrollable, and close to “pathological levels”: at [48]. The significance of that distinction will appear later. In about April 2000 Mrs Politarhis realised that Mr Politarhis was drawing on the ACCU line of credit.
In May 2000 Mr and Mrs Politarhis authorised the financial counsellor to inform ACCU of what had happened. ACCU immediately froze the account: at [28].
At various times between 1993 and 2000 Mr Politarhis had borrowed money from other sources. This other borrowing is summarised in the Judge’s reasons at [53].
After May 2000 ACCU made various demands on Mr Politarhis for repayment, and threatened legal action. As it happened, ACCU did not bring proceedings to recover its debt. Even when Mr Politarhis began the present action, in which he made a claim against ACCU similar to that made against Westpac, ACCU did not institute a cross-claim: at [54]. I interpolate here that the Judge dismissed the claim by Mr and Mrs Politarhis against ACCU. Although Mr Politarhis appealed against that aspect of the Judge’s decision also, the appeal against the judgment in favour of ACCU was later abandoned.
I gather that after May 2000 Mr Politarhis did not inform SLCU about his gambling. Over time SLCU increased the limit on the line of credit made available by it, and by December 2002 that limit had reached $160,000. Most of this money had been lost by Mr Politarhis by gambling it, although some was used to discharge a Defence Forces home loan to Mr and Mrs Politarhis of about $18,000. That was in August 2001: at [30].
In March 2003, the limit of $160,000 with SLCU having been reached, Mr and Mrs Politarhis applied to Westpac for a loan of $180,000, again by way of a line of credit: at [31]. This was the first loan referred to above. Westpac duly agreed to lend this amount. The line of credit became available on 17 April 2003.
About $165,000 of the advance was paid to SLCU to discharge the debt owed to SLCU, and to discharge its mortgage: at [31]. Mr and Mrs Politarhis granted a mortgage to Westpac to secure money advanced by it: at [31]. The effect of the first loan was that after paying what was owed to SLCU, further credit in an amount of about $15,000 was available to Mr and Mrs Politarhis.
By July 2003 the limit on the first loan of $180,000 had been reached: at [31]. Most of the further advance had been spent on gambling.
In late November 2003, repeating the pattern above, Mr and Mrs Politarhis applied to Westpac to increase the limit on the first loan to $198,000.
Westpac agreed, but did so by entering into a new loan agreement with Mr and Mrs Politarhis. The agreement was entered into on 9 December 2003: see exhibits P34 and P36. Westpac agreed to make a line of credit available to Mr and Mrs Politarhis with a limit of $198,000. They could draw against that limit, subject to the limit not being exceeded. Each of them was individually liable for the full amount of the loan: see exhibit WD92. The purpose of the advance was described as follows: “The predominant purpose of this loan is Refinancing”. There is no suggestion that Mr Politarhis at this stage disclosed his gambling problem to Westpac.
The amount of the advance was to be applied to repay all amounts still owed by Mr and Mrs Politarhis to Westpac under the first loan. The amount outstanding was about $180,000. The second loan was to be secured by the existing mortgage to Westpac over the house property.
The intended effect of the arrangement for the second loan was to make available to Mr and Mrs Politarhis a further $18,000, after discharging the first loan: at [32].
Unfortunately history repeated itself. Westpac omitted to debit the amount of the first loan to the second loan account, and so failed to discharge the existing debt of about $180,000. By mistake, Westpac made available to Mr and Mrs Politarhis a line of credit for an amount not exceeding $198,000, instead of a further $18,000.
In late December 2003 Mr Politarhis realised Westpac’s mistake: at [34].
At about this time ACCU had written to Mr Politarhis threatening to take action to recover its debt: at [56]. Mr Politarhis did not tell Westpac of its mistake, nor did he tell his wife. He began to draw against the second loan, keeping the balance from the first loan below its limit of $180,000, so that the unsuspecting Mrs Politarhis could continue to use that account. The Judge quoted a portion of the evidence given by Mr Politarhis, in which he explained the circumstances of his decision to take advantage of Westpac’s mistake. It bears repeating. Mr Politarhis referred to a telephone call to Westpac in which he asked to be informed of the balance of his account, and what ensued was summarised by him as follows:
A.When I did that, the lady said to me “Which account?” and I didn’t know what to think at that instance and I said “What do you mean what account?”, and she said to me “You’ve got two accounts, one for 180 and one for 198”. Well, it was Christmas and I thought all my Christmases had come at once because here I was, being threatened by Australian Central Credit Union with legal action about their 55,000, and being already fairly sick, I had no control at all. I thought I would just go into a little bit and this time I would not panic but I’ve panicked and lost control on the first day when I lost about $7,000 or $8,000 on the first day. Once that went, I was totally committed. My wife wasn’t aware of this so I had a dilemma of how to try and keep it from her. Fortunately for me, my wife was still able to operate the previous account of the $180,000 using her same card that she was accustomed to. So she didn’t have a card accessing the new account because, in fact, she wasn’t aware of the new account. All she was aware of: that we had borrowed $198,000 and I paid my debts off and she just kept using her card to take out shopping money and bill money etc. and remained ignorant because I always kept a balance of $180,000 well within the limits, so she had no complaint, and I was telling her that I was actually winning and I was putting money in for her not to notice that I was actually operating another account. …
Between late December 2003 and March 2004 Mr Politarhis withdrew about $150,000 against the second loan. Most of the money was lost by gambling, although some of the money must have been used for household expenses.
In February 2004 Mr Politarhis told Mrs Politarhis what had happened. Mrs Politarhis did not inform Westpac. She begged her husband to stop gambling, but did not do anything else. Mr Politarhis had threatened to kill himself if she told Westpac. The Judge was satisfied that Mrs Politarhis was in this way persuaded not to inform Westpac: at [37].

By the end of March 2004 the amount owing under the second loan was about $153,000. That day Mr Politarhis told Westpac what had happened. Both accounts were immediately frozen. Since then there have been no further withdrawals from either account, nor have any repayments been made by Mr and Mrs Politarhis: at [39].
On 8 March 2006 Westpac made certain book entries which it described as a “regularisation”. Westpac debited almost $20,000 to the second loan account, bringing the total indebtedness under that account to $198,000, and reduced the indebtedness under the first loan account by the same amount of almost $20,000. That reduced the balance owing on the first loan to about $188,000: at [40].
That is the background to these proceedings. It is convenient now to summarise the claim made by Mr Politarhis against ACCU and against Westpac. I adopt the Judge’s summary, which is as follows:
[60]Although the plaintiff did not articulate the matter precisely in this way, I understand his claims to be put on a twofold basis. The first basis was that the conduct of ACCU had caused him psychiatric injury, being his pathological gambling, depression, cannabis addiction and other psychological conditions. The effect of those injuries has been to produce both non-economic and economic loss, with the economic loss comprising his loss of income and loss of superannuation contributions (both past and future). The second basis was that the conduct of ACCU had operated directly to cause financial loss comprising his gambling losses and corresponding indebtedness to both ACCU and to Westpac. Thus the plaintiff asserted an entitlement to recover from ACCU the amount of the liability to Westpac ($180,000 under the old account and $154,000 under the new account) and $120,000 which is said to be the aggregate of the amounts which he derived, by one means or another, from various members of his family and dissipated in gambling.
...
[62]The plaintiff claims that in December 2003, when Westpac mistakenly made the whole of the additional credit of $198,000 available to be withdrawn, he was suffering from mild depression and a “chronic, debilitating and simmering gambling addiction/dependence/illness”. He was unable to restrain himself from making use of the additional credit and so gambled away some $150,000. He claims that the effect of doing so was to change him from a “severely compulsive gambler” to a “pathological” gambler and to exacerbate his depression so that it became a major depressive disorder with psychotic episodes. He says that he experienced “uncontrollable anxiety, panic attacks, uncertainty and started to feel helpless and hopelessness” and that he increased his use of cannabis resulting in a full-blown addiction.
[63]The plaintiff claims that these conditions have continued virtually unabated since April 2004. His depression has been such that, since Westpac’s mistake in December 2003, he has attempted suicide on more than one occasion. His work performance deteriorated, culminating in his dismissal from his employment, which took effect on 23 April 2004.
[64]The plaintiff alleges that Westpac’s conduct in making the additional credit of $198,000, instead of $18,000, available to him was negligent. He claims damages from Westpac in respect of that negligence. Again, I understand those damages to be sought on a twofold basis. First, the plaintiff claims damages in respect of the psychiatric injury which he alleges Westpac’s conduct has caused, with those damages to include damages for both non-economic loss and economic loss (including superannuation) past and future. Secondly, the plaintiff claims damages from Westpac for the financial loss, which he says resulted from its conduct, that loss comprising two of the same heads of damage which he claims from ACCU, namely, the sums of $120,000 and $154,000. However, in his final address, the plaintiff tacitly conceded that he could not recover from Westpac the $154,000 of its money which he had used in gambling.
Findings by the trial judge
The Judge made a number of findings of fact. A number of them involved the Judge’s assessment of Mr Politarhis. In connection with those findings it is pertinent to bear in mind that the hearing before the Judge lasted more than ten days, and during this time Mr Politarhis was conducting his own claim and, in substance, the claim by his wife. The Judge had ample opportunity to observe him as a witness and as a litigant.
I will summarise the main findings made by the Judge. Not many of these findings were challenged by Mr Politarhis.
The Judge found that Mr Politarhis was “reasonably intelligent and articulate”: at [68]. Having considered the written submission that Mr Politarhis submitted in support of his appeal, and having had the opportunity to observe him make oral submissions, I agree with the Judge’s finding.
The Judge also found that Mr Politarhis:
... had a very clear appreciation of where his interests lay in the litigation and was often aware of the effect which certain evidence would have on those interests. He was prepared to adapt his evidence so as to have it fit in with his interests, as he perceived them.
Other passages in the Judge’s reasons provide ample support for this conclusion. To say this is not to reject everything that Mr Politarhis put forward. But as the Judge found, Mr Politarhis is convinced that the cause of his mental and physical problems, and of his financial difficulties, is the mistake made by ACCU and later the mistake made by Westpac. Driven by that conviction he shapes all events accordingly. As the Judge pointed out, by way of illustration to support the finding just referred to, in an unrelated claim under an insurance policy in 2005 it appears that Mr Politarhis attributed his depression and anxiety to the injury in 1992 for which he received worker’s compensation, in contrast with the claims made in these proceedings.
On the Judge’s findings there may have been an unconscious component in the manner in which Mr Politarhis assembled and sorted the facts of the case. But the Judge said at [70]:
[70]The plaintiff has a history of manipulating people and circumstances, including by telling untruths, in order to pursue his own interests. …
Mr Politarhis admitted telling various untruths during the course of his employment, and to manipulating his wife, including lying to her. A psychologist and psychiatrist, each of whom examined Mr Politarhis, commented on his manipulative personality and style: at [70]. The Judge found that at times during his cross-examination Mr Politarhis was deliberately evasive: at [71]. The Judge found aspects of Mr Politarhis’ evidence to be “quite implausible”: at [72]. The Judge completed his assessment of Mr Politarhis as follows at [74]:
[74]In summary, I am not prepared, generally, to treat the plaintiff’s evidence which does not involve an admission against his interests as being reliable. That is particularly so if it is not supported by other reliable evidence.
As to Mrs Politarhis, the Judge accepted that she was an honest witness, but dominated by her husband and persuaded by a belief in his claims: at [75]-[77].
As best I can tell, Mr Politarhis did not really challenge these findings. To some extent he appears to attribute the unreliability of his evidence to what he described as a pathological state. But as the Judge recorded in his reasons at [70], Mr Politarhis acknowledged his own manipulative qualities. The Judge refers to a telling answer in evidence when Mr Politarhis, explaining how he persuaded his wife not to inform Westpac of its mistake at the end of February 2004, said:
Your Honour, you have no idea how manipulative and convincing I can be.
Before turning to the Judge’s findings relating to Mr Politarhis’ condition, and Mr Politarhis’ claim to have suffered a psychiatric illness, it is convenient to summarise the position.
As can be seen from the Judge’s summary of Mr Politarhis’ claim (above), Mr Politarhis drew a distinction between his health and state of mind before and after the mistake made by ACCU and before and after the similar mistake made by Westpac. The Judge’s summary of Mr Politarhis’ claim against ACCU is set out in his reasons at [60], which summary I have set out above. The summary of the claim against Westpac is found in paragraphs [62]-[64], set out above. On appeal, Mr Politarhis made no attempt to address the inherent difficulty in attributing the cause of his condition, whatever it might be, to ACCU and to Westpac. As the Judge dismissed his claim against ACCU, that at least left it open to him to seek the findings as against Westpac that he sought all along.
In essence, Mr Politarhis argued that before Westpac made its mistake he was a problem gambler, and no more than that. He was a person who had difficulty controlling his gambling but could control it. He used cannabis, but only occasionally. He had suffered from depression, but with medication had overcome that depression prior to Westpac’s mistake. He was managing his life, paying his bills, and his physical health and mental health were satisfactory. Mr Politarhis claims that once Westpac made its mistake and he had available to him the line of credit of $198,000, and once he gambled and lost most of it, his condition became pathological, and his situation became hopeless. He emphasised the loss of hope, and the fact that his gambling had now become pathological, as distinct from a mere problem that he could manage. He became severely depressed. He began to consume cannabis in much greater quantities than before. He was completely unable to control his compulsion to gamble, and could not function without gambling. In short, once he had access to the line of credit by Westpac, and had lost the bulk of it, his situation was hopeless and his condition was pathological. He emphasised the loss of control over his gambling, and the loss of hope, once he got access to the money made available by Westpac.
I will return to these submissions by Mr Politarhis a little later.
Recognising that Mr Politarhis’ claim depended on proof that he had suffered from a recognisable psychiatric illness, the Judge considered whether “pathological gambling” was such an illness: at [95]. The Judge gave careful consideration to evidence led from Dr White, a psychologist, and from Dr Cotton, a psychiatrist. The Judge also allowed Mr Politarhis to tender a report from a psychiatrist, Dr Rose, without Dr Rose being called to give evidence.
Dr White had concluded that Mr Politarhis was a pathological gambler. He described pathological gambling as “an uncontrolled desire to gamble”, involving a willingness to go to extreme lengths to obtain the necessary money: at [96]. He considered a pathological gambler to be suffering from a mental disorder. However, Dr White considered that a personality disorder and an anti-social personality disorder were the underlying causes. Be that as it may, the Judge preferred Dr Cotton’s evidence. He summarised that evidence at [99]:
[99]It can be seen that Dr Cotton accepted that the plaintiff may have had mental illnesses, such as depression, paranoia, anxiety and suicidal ideation from time to time, but considered that his enduring mental health problems reflected a widespread personality disorder. In particular, Dr Cotton attributed the plaintiff’s pathological gambling to an underlying personality disorder which he considered to have been entrenched for many years.
However, the Judge was prepared to accept that Mr Politarhis may have suffered a recognised psychiatric illness. He said at [104]:
[104]My preference for Dr Cotton’s opinions does not mean that the plaintiff cannot establish that he has suffered a recognised psychiatric illness. Dr Cotton accepted that the plaintiff may at times have suffered from significant symptoms of depression, anxiety, paranoia and suicidal ideation and, as I understand it, accepted that these were of sufficient severity to amount to a psychiatric illness. As will be seen later, there are issues about the causation of these conditions but I am not satisfied that the plaintiff’s claims with respect to mental injury should fail at the outset because of lack of proof that the plaintiff has suffered from at least some form of recognised psychiatric illness.
It is apparent from this part of the Judge’s reasons that he was prepared to accept that at various times Mr Politarhis was suffering from a recognised psychiatric illness, the symptoms of which included depression, anxiety, paranoia and suicidal ideation. My understanding of the Judge’s reasons is that Mr Politarhis’ compulsive gambling, or pathological gambling, was attributable to an entrenched personality disorder. The Judge appears not to have accepted that pathological gambling was a mental illness in itself, but rather a manifestation of another mental illness.
The Judge addressed in some detail the question of when the condition of compulsive gambling developed, or when it had been exacerbated to a material degree. For these purposes the Judge reviewed the evidence given by Mr Politarhis, and the other evidence before him.
The Judge found that Mr Politarhis had a long history of compulsive gambling, and that compulsive gambling was “well entrenched” by the middle of 1999 or at least by the end of that year: at [153]. This led the Judge to the conclusion that the condition of compulsive gambling was well established before the mistake by ACCU and before the mistake by Westpac: at [166] and at [217]. Nor did the mistaken provision of credit worsen the condition of pathological gambling. The Judge concluded that the increase in the frequency and amount of betting after each of these mistakes was simply a manifestation of Mr Politarhis’ underlying condition: at [167].
It followed that the claim that the mistake by ACCU caused him psychiatric illness in the form of pathological gambling failed. It failed because the Judge was not satisfied that pathological gambling constituted a mental illness in the relevant sense, and because in any event the Judge found that the condition of pathological gambling was well entrenched by at least mid 1999: [168].
As the depression, paranoia and heavy use of cannabis were attributable to Mr Politarhis’ gambling, it followed that the claims in respect of those conditions also had to fail: [170] and [218]. The Judge found in particular that Mr Politarhis had been a “significant user” of cannabis for many years prior to 1999: at [170].
As I indicated earlier, Mr Politarhis challenges some of these findings.
He submits that the proper finding on the evidence is that until the mistake by Westpac his gambling was a problem, but that he was able to manage the problem, and to function normally. He had recovered from the depression that had affected him in the past. He submits that the evidence pointed to a conclusion that he was using cannabis only to a moderate degree prior to the mistake by Westpac. Accordingly, he argues that it was after the mistake by Westpac that his gambling became pathological, and he began to use cannabis to excess, and that the conditions of depression and paranoia developed.
I will come back to that challenge.
However, to the extent that Mr Politarhis attributed the onset of mental illness or psychological illness to the mistake by ACCU, his claim against Westpac could only have been a claim that these conditions were exacerbated by the mistake made by Westpac.
When the Judge came to decide the claim against Westpac, he drew on his reasoning in deciding the claim against ACCU.
In relation to the claim for damages on the basis that a mistake by ACCU or by Westpac caused Mr Politarhis’ psychiatric illness, the Judge accepted that there may be circumstances in which a person owes a duty to take reasonable care to avoid causing a recognised psychiatric illness to another: at [93]. In relation to ACCU, the Judge doubted whether such a duty of care arose: at [168]. However, in relation to Westpac, the Judge was satisfied that no duty of care to avoid causing Mr Politarhis’ psychiatric injury arose: at [214]. It is evident from the Judge’s consideration of the claim against ACCU that he doubted whether the relationship between ACCU and Mr Politarhis was one that could give rise to a relevant duty of care: at [93]. But in relation to Westpac, in any event, he treated it as decisive that Westpac had no knowledge prior to its mistake that Mr Politarhis had a gambling problem: at [214]. He also treated as significant the fact that it was a condition of the advance by Westpac that the amount owing at any one time was not to exceed $198,000, and that Mr Politarhis contravened that contractual condition: at [215]. The Judge also found that it was not reasonably foreseeable by Westpac that the failure to apply the second loan to discharge the first loan might result in financial loss to Mr Politarhis: at [216]. So, for those reasons, no relevant duty of care was owed in relation to psychiatric illness.
The Judge found that for the reasons he gave in relation to the claim against ACCU, Mr Politarhis had failed to prove that Westpac had caused him a psychiatric injury, and that a pathological gambling condition preceded the mistake made by Westpac: at [217].
In relation to the claim for financial loss as a result of gambling, the Judge treated the claim as invoking the principles considered by the High Court in Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180. The Judge noted that foreseeability of economic or financial loss is not, in itself, sufficient to impose a duty to take reasonable care to avoid causing that loss. The Judge accepted that it was reasonably foreseeable by a lender of money that at least some persons who wished to borrow money from the lender would use the money to satisfy an addiction of one kind or another.
The Judge concluded that ACCU did not owe to Mr Politarhis a duty of the kind invoked by him: at [178]. The Judge canvassed a number of relevant factors supporting that conclusion: at [178]-[188]. The Judge also concluded that the mistake by ACCU did not cause the loss sustained by Mr Politarhis: at [201]. In the Judge’s opinion it was not enough that ACCU had made available the funds with which Mr Politarhis gambled. The Judge treated the real cause of the loss as the deliberate decision by Mr Politarhis to take advantage of the mistake that he knew had been made.
In relation to Westpac, the Judge again concluded that there was no duty to take reasonable care to avoid causing financial loss in the circumstances, that it was not reasonably foreseeable that financial loss would be caused by a failure to discharge the first loan, and that the financial loss was not caused in the relevant sense by Westpac: at [214]-[217].
The Judge also found that to the extent that there had been any exacerbation of Mr Politarhis’ psychological conditions, that had not been caused by Westpac: at [218].
Appeal against the dismissal of Mr Politarhis’ claim
Some of the submissions by Mr Politarhis had little to do with the issues that the Judge had decided. Not surprisingly, Mr Politarhis found it difficult to cope with the issues of fact and of law that the case presents. Mr Politarhis failed to deal with some of the matters of law that had to be tackled if the Judge’s decision was to be reversed.
I propose to deal first with the submissions by Mr Politarhis, as I understood them. I will then deal with the other main issues in the case, even though they were not really dealt with by Mr Politarhis. It is appropriate that I should indicate why I agree with the trial Judge. But because most of these issues were not the subject of detailed submissions on either side I propose to deal with them relatively briefly.

In his written and oral submissions Mr Politarhis argued that by failing to apply the money advanced on the second loan to repay the amount outstanding on the first loan, Westpac was in breach of its contract with Mr and Mrs Politarhis, and so could not recover the amount of the second loan. In his written submissions Mr Politarhis accepted that if the Court found that only the contract relating to the first loan was enforceable, then he and Mrs Politarhis were liable to repay the amount of the first loan. However, he argued that they were liable to repay only $180,000, arguing that they should not have to pay any interest because Westpac had frustrated his efforts to eliminate the arrears through resorting to an entitlement under a superannuation fund.
Mr Politarhis appeared to advance this argument in support of his claim for damages. If it has any merit, it seems to me that the argument could operate only by way of a defence to Westpac’s cross-claim.
In my opinion the submission has no merit. It is obvious that Westpac made a mistake. Westpac failed to apply the money advanced on the second loan as it had intended to, and had agreed, in payment of the amount due under the first loan. The consequence is that it has allowed Mr and Mrs Politarhis to incur a greater overall debt than it had intended to or had agreed to. But Mr Politarhis knowingly took advantage of Westpac’s mistake. The Judge so found, and that finding is not challenged. Mr Politarhis has had the benefit of the money advanced by Westpac.
Having regard to the nature of the mistake by Westpac, and the part played by Mr Politarhis in taking advantage of the mistake, I consider that the mistake by Westpac presents no obstacle to Westpac recovering from Mr and Mrs Politarhis the full amount advanced to them. The amount advanced might be recoverable under the loan contract, or it might be recoverable as money paid by mistake, giving rise to a claim of a restitutionary nature. But in my opinion there is no doubt that the mistake by Westpac does not prevent it from recovering all of the money advanced.
Mr Politarhis drew to the Court’s attention correspondence between him and the solicitors for Westpac in which he offered, subject to certain conditions, to repay either the amount of the first loan or the amount of the second loan, without interest, in full settlement of all claims against him. In some of the correspondence other conditions were attached. These offers were not accepted by Westpac.
Mr Politarhis tendered in support of this argument certain letters passing between him and the solicitors for Westpac which had not been tendered at trial. Mr Politarhis explained that he did not appreciate at trial the need to do so. The tender of the letters should be rejected. The admission of further evidence is not justified in the circumstances of the case. But in any event, there is no substance in the argument based on the letters. The fact that Mr Politarhis offered to repay some of the money advanced to him and Mrs Politarhis is no answer to the claims made by Westpac. It could at most have some bearing on the issue of costs, if Westpac were found to be entitled to recover only an amount not exceeding what Mr Politarhis had offered.
Mr Politarhis submitted that the Judge erred in making the following finding at [171]:
[171]I am satisfied that the plaintiff’s depression, anxiety, paranoia and cannabis use were well entrenched before ACCU’s mistaken advance of credit. I accept however that once the plaintiff had taken advantage of the credit and had squandered monies in gambling, that he may well have become further depressed and resorted to still more extensive use of cannabis. That depression and cannabis use, however, were reactive to the consequences of his pathological gambling and, on my findings, are not conditions for which ACCU (or for that matter, Westpac) is causally responsible.
His criticism was directed to the finding to the extent that the finding related to cannabis use and depression, although I think that it is likely that he intended the submission to relate also to the finding as to anxiety and paranoia.
Immediately prior to making this finding the Judge referred to some of the material on which he had relied, that material being in the form of notes made by doctors and other medical attendants, based on information provided by Mr Politarhis when consulting them or when admitted to hospital.
Mr Politarhis pointed to the fact that included in this material is a report from Dr Rose, tendered by Mr Politarhis without calling Dr Rose, in which Dr Rose recorded obtaining a history from Mr Politarhis in July 2005 of smoking as many as 10 pipes of marijuana daily since 1995: see Exhibit P95. Mr Politarhis said that he had told Dr Rose that at the time of the consultation with Dr Rose (20 July 2005) he was using cannabis to that extent, and that he had smoked cannabis since about 1995, and that Dr Rose had mistakenly combined the two pieces of information. Mr Politarhis drew the Court’s attention to other medical histories in which he had given a history consistent with a moderate use only of cannabis before he dealt with Westpac.
It may be that Dr Rose misunderstood what Mr Politarhis told him. The material to which Mr Politarhis pointed supports his submission. But the Judge’s finding was not based wholly or even mainly on the report from Dr Rose. There was other evidence referred to by the Judge indicating that Mr Politarhis used marijuana before December 2003. Indeed, Mr Politarhis himself agreed that this was the case, although in his submission he argued that before December 2003 he used marijuana only to a limited extent. But in any event, in the finding that I set out, the Judge accepted that after Mr Politarhis got access to money from ACCU and Westpac, he may have used cannabis more extensively. And, as the Judge found, the cannabis use was in any event reactive to, or attributable to, the pathological gambling by Mr Politarhis. It would not be surprising if the use of cannabis increased when the amount of gambling increased, and the consequences of the gambling became all the more serious. In short, even if the Judge should have found that Mr Politarhis used marijuana only moderately before December 2003, it remains the case that his use of marijuana did not begin after December 2003, and the Judge accepted that his use of marijuana increased after that time. And finally, the use of marijuana could never have been treated as anything more than a symptom of, or a response to, some other underlying problem.
Mr Politarhis made a similar point in relation to the finding as to depression. That finding is made in the paragraph set out above. Mr Politarhis again referred to notes in medical records recording what he had apparently told doctors and other medical attendants about his use of anti-depressant medication. He argued that the relevant records indicated that while he had been on a high dosage of anti-depressant in late 1999, subsequently he had reduced his dosage significantly, but that dosage increased in 2004 after he began gambling with the money obtained from Westpac.
It may be that the Judge put more emphasis on the history of depression than was warranted. But I bear in mind that the Judge was drawing on the whole of the material before him, whereas Mr Politarhis’ approach was confined to one aspect of the medical records. But what is significant is that Mr Politarhis had a history of depressive episodes, including suicide attempts, before he dealt with Westpac. And the Judge accepted that the depression became worse after the mistaken advance of credit by ACCU. Moreover, as the Judge said, and this was clearly soundly based, the depression was reactive to the consequences of pathological gambling by Mr Politarhis, and so it is not surprising that the depression worsened when the level of gambling increased.
In his written submission (para 119) Mr Politarhis himself acknowledged that all of his conditions (those referred to by the Judge) were “pre-existing in some form”, arguing that they were aggravated as a result of him being placed in a vulnerable position.
In short, it cannot be denied that Mr Politarhis had a history of depression, and one would expect that depression, in all the circumstances, to worsen during periods of gambling. Even if the Judge somewhat overstated the significance of the depression prior to December 2003, I do not consider that that overstatement in any significant way undermines the Judge’s ultimate conclusions.
Mr Politarhis also challenged the finding of the Judge at [153] that:
… the plaintiff has a long history of compulsive gambling and that that gambling was well entrenched by mid-1999, or at least by the end of 1999. …
The Judge went on to summarise the evidence on which he relied. Having done so, at [166] he found that Mr Politarhis was a compulsive gambler, and that that condition was well entrenched before ACCU made its mistake in February 2000.
Mr Politarhis argued, again in his written and oral submissions, that while he had a gambling problem, he was not a pathological gambler until after December 2003. He argued that before the mistake by Westpac he was gambling, admittedly with money he could not afford, that he was still working, he was paying his bills, and he was functioning normally. But once he had lost the money advanced by Westpac, and ACCU and Westpac were demanding repayment, he knew he could not repay the loans, he became severely depressed, he lost his job and became a disability pensioner. He no longer functioned normally and everything came second to a desire to gamble as a means of escaping from his problems.
In my opinion the evidence relied on by the Judge provides firm support for a finding that Mr Politarhis was a compulsive gambler before he dealt with Westpac. By this finding I understand the Judge to mean that Mr Politarhis’ underlying personality disorder manifests itself in a pre-occupation with irresponsible gambling. While the inclination or tendency to gamble is very strong, and Mr Politarhis has difficulty in controlling the desire to gamble, he is capable of controlling his gambling if he takes appropriate measures. His condition is not one in which the impulse to gamble is irresistible: see Exhibit AD88, report of Dr Cotton, p 14.
The Judge rightly gave more weight to evidence from various witnesses about what Mr Politarhis had told them, than he gave to the evidence from Mr Politarhis about his own state. There was very clear evidence, from a variety of sources, that before Mr Politarhis dealt with Westpac his gambling was of a compulsive nature, even though he continued to maintain employment and, in a sense, to function normally.
The submission by Mr Politarhis ignores the fact that before the trial Judge he claimed that the mistake by ACCU in making money available to him caused him to suffer from a pathological gambling condition. The findings of the Judge now under consideration were made when dealing with that very claim. The reaction of Mr Politarhis to the mistake by ACCU, and the manner in which he gambled away the money he obtained from ACCU, demonstrates the compulsive nature of his gambling. The shift on appeal, to argue that prior to his dealings with Westpac he was no more than a problem gambler, illustrates the manner in which he tailors circumstances to the needs of the immediate situation.
I accept that, overall, Mr Politarhis’ mental state was worse in early 2004 than it was in late 2003 before he began to deal with Westpac. But on the Judge’s findings, that is an unsurprising consequence of and reaction to the situation into which Mr Politarhis’ compulsive gambling habit had led him. His dealings with Westpac did not cause him to be a compulsive gambler, or a pathological gambler if that term is to be used. He was at least a compulsive gambler before he dealt with Westpac, and his compulsive gambling led to him gambling away money to an extent that produced a state of affairs from which there appeared to be no escape, having regard to the size of his indebtedness. It is not surprising that in those circumstances his underlying tendency to depression should reassert itself, that he should be highly anxious and increase his use of marijuana.
In my opinion the Judge’s findings in relation to Mr Politarhis being a compulsive gambler are soundly based. I do not accept the arguments advanced by Mr Politarhis.
I have now dealt with the challenges by Mr Politarhis to the Judge’s findings. Mr Politarhis made only brief submissions on the matters of law with which the Judge dealt. Mr Duggan, counsel for Westpac, also made relatively brief submissions on matters of law. It might be said that as there is no challenge of substance to the Judge’s conclusions on matters of law, there is no need to go any further. However, the appeal challenges the dismissal of the claim, and so I propose to indicate in relatively brief terms why I agree with the Judge’s conclusions on matters of law.
The Judge proceeded on the basis that Mr Politarhis was claiming that Westpac was in breach of a duty of care that it owed to Mr Politarhis, or was in breach of a contract between Westpac and Mr and Mrs Politarhis: at [64] and [65].
The first formulation by the Judge of the duty of care in question was a duty on the part of Westpac to take reasonable care to avoid causing Mr Politarhis, as a borrower from Westpac, to develop a psychiatric injury or illness or to experience an exacerbation in the seriousness of a pre-existing psychiatric injury or illness. The context in which the suggested duty arose was the agreement by Westpac to lend money to Mr and Mrs Politarhis and the mistake by Westpac in making available more than the agreed amount. The psychiatric injury or illness that was identified was the claim by Mr Politarhis that he had developed, or suffered an exacerbation of, a pathological gambling condition, depression and excessive consumption of marijuana.
In dealing with the claim against ACCU, the Judge doubted whether a relevant duty of care arose, but found it unnecessary to decide the point, because the claim failed for other reasons: at [168]. But in dealing with the claim against Westpac the Judge found that the suggested duty of care did not arise. The Judge said at [214]:
[214]For reasons which are similar to those given in relation to the claim made against ACCU, I am satisfied that the circumstances of the plaintiff’s relationship with Westpac did not give rise to a duty in Westpac not to cause him psychiatric injury and financial loss. That conclusion can be reached even more confidently in the case of the claim against Westpac. There is no evidence that Westpac had any knowledge at all of the plaintiff’s gambling or of his use of the credit it provided for gambling. That is, the one feature which Spigelman CJ considered in Reynolds v Katoomba RSL [2001] NSWCA 234 at [28]; (2001) 53 NSWLR 43 at 48 could possibly give rise to a duty of care, namely knowledge of the plaintiff’s gambling problem, is not present in this claim.
I agree that Westpac owed no relevant duty of care.
The circumstances in which a duty may arise requiring a person to take reasonable care to avoid causing psychiatric injury to another were considered by the High Court in Tame v New South Wales; Annetts v Australian Stations Pty Ltd [2002] HCA 35; (2002) 211 CLR 317. That case establishes, in the words of Gleeson CJ at [12], that:
[12]A necessary, although not sufficient condition of the existence of a legal duty of care is reasonable foreseeability of the kind of injury that has been suffered by the person to whom the duty is owed. …
A similar point was made by Gaudron J at [62], where she said:
[62]To say that "normal fortitude" is not and cannot be the sole criterion of foreseeability, is not to deny that, ordinarily, "normal fortitude" will be a convenient means of determining whether a risk of psychiatric injury is foreseeable. However, it will be otherwise if the defendant has knowledge that the plaintiff is particularly susceptible to injury of that kind or is a member of a class known to be particularly sensitive to the events in question.
More difficult is the question of deciding when, having regard to all relevant circumstances, a duty of care to avoid causing psychiatric injury is to be imposed. For present purposes it suffices to refer to the reasons of the majority in Tame. Gleeson CJ said at [13]-[14]:
[13]In Jaensch v Coffey, Deane J emphasised that the concepts of reasonable foreseeability, and what he called "proximity of relationship", are related. What a person is capable of foreseeing, what it is reasonable to require a person to have in contemplation, and what kinds of relationship attract a legal obligation to act with reasonable care for the interests of another, are related aspects of the one problem. The concept of reasonable foreseeability of harm, and the nature of the relationship between the parties, are both relevant as criteria of responsibility.
[14]Requiring a person, when engaged in a certain kind of activity, to have in contemplation a certain kind of risk to others, may be extremely onerous, especially if predictability of harm were the only basis upon which such a requirement is imposed. …
Gaudron J said at [52]:
[52]To identify those who may claim for pure psychiatric injury as those who should be in the contemplation of the person whose acts or omissions are in question as persons closely and directly affected is not to say that the categories of persons who may recover damages for pure psychiatric injury are open-ended. Save for those who fall within the "direct perception rule", as extended by Jaensch v Coffey, a person will be able to recover for psychiatric injury only if there is some special feature of the relationship between that person and the person whose acts or omissions are in question such that it can be said that the latter should have the former in contemplation as a person closely and directly affected by his or her acts.
Gummow and Kirby JJ said at [183]-[185]:
[183]Advances in the capacity of medicine objectively to distinguish the genuine from the spurious, and renewed attention to the need to establish breach, causation and a recognisable psychiatric illness that is not too remote, indicate the need for re-accommodation of the competing interests which are in play in "nervous shock" cases. But that accommodation is better achieved by direct attention to, rather than attempts to ignore, the conflict of interests involved. This reflects the preferred approach to defining the limits of liability in negligence, which takes as its starting point, not merely the actions of the defendant, but the interests which are sufficient to attract the protection of the law in this field. The recognition of those interests and the preferred resolution of conflicts between them assist in the formulation of the appropriate duty of care.
[184]Of course, a finding that a duty of care operates in a particular situation may advance interests in deterring wrongdoing or spreading loss, but the recognition that those interests exist does not dictate any particular holding with respect to the existence of a duty of care. In Perre v Apand Pty Ltd, Hayne J explained:
“It is not enough to say that compensating those who are injured, deterring wrongdoing or spreading loss are values that are reflected in the law of negligence. They may be. But these do not assist in deciding whether a duty of care exists. They do not assist because each of them is a corollary of a finding that a duty does exist and none, therefore, helps to say whether a duty should be found to exist. Equally, references to the possibility that there are many persons in the same position as a particular plaintiff, or that the losses sustained by a plaintiff and others in like case are very large, do not help any more than do references to floodgates or the like.” (Original emphasis.)
[185]A fundamental objective of the law of negligence is the promotion of reasonable conduct that averts foreseeable harm. In part, this explains why a significant measure of control in the legal or practical sense over the relevant risk is important in identifying cases where a duty of care arises. Further, it is the assessment, necessarily fluid, respecting reasonableness of conduct that reconciles the plaintiff's interest in protection from harm with the defendant's interest in freedom of action. So it is that the plaintiff's integrity of person is denied protection if the defendant has acted reasonably. However, protection of that integrity expands commensurately with medical understanding of the threats to it. Protection of mental integrity from the unreasonable infliction of serious harm, unlike protection from transient distress, answers the "general public sentiment" underlying the tort of negligence that, in the particular case, there has been a wrongdoing for which, in justice, the offender must pay. Moreover, the assessment of reasonableness, which informs each element of the cause of action, is inherently adapted to the vindication of meritorious claims in a tort whose hallmark is flexibility of application. Artificial constrictions on the assessment of reasonableness tend, over time, to have the opposite effect.
Footnotes omitted
They added at [201]:
[201] However, the concept of "normal fortitude" should not distract attention from the central inquiry, which is whether, in all the circumstances, the risk of the plaintiff sustaining a recognisable psychiatric illness was reasonably foreseeable, in the sense that the risk was not far-fetched or fanciful. It may be that, in some circumstances, the risk of a recognisable psychiatric illness to a person who falls outside the notion of "normal fortitude" is nonetheless not far-fetched or fanciful. If that is so, it is then for the tribunal of fact to determine what a reasonable person would do by way of response to the risk, in the manner indicated in Wyong Shire Council v Shirt. Where the plaintiff's response to the defendant's conduct is so extreme or idiosyncratic as to render the risk of that response far-fetched or fanciful, the law does not require the defendant to guard against it. Thus, as Pound observed in 1915, where a putative tortfeasor "so far as he could reasonably foresee, does nothing that would work an injury, the individual interest of the unduly sensitive or abnormally nervous must give way".
Footnotes omitted

The starting point is the finding that Westpac had no knowledge of Mr Politarhis’ gambling habit, a finding by the Judge that is soundly based. Indeed, if one were to accept the submissions by Mr Politarhis, one would conclude that he would have been able to conceal from Westpac, and would have concealed, the fact that he was a problem gambler.
The Australian community includes people who have the potential to develop an addiction to gambling if exposed to gambling in a significant way, and people who are already so addicted; it includes people who have the potential to develop an addiction to unlawful drugs, and people who are already addicted; it includes people who have the potential to become alcoholics, and people who are alcoholics; it includes people who are incapable of managing properly a large amount of money and people who are likely to squander money, if available to them, on unsound enterprises. But even though such people are found in the Australian community, the test of reasonable foreseeability is not so undemanding as to lead to the conclusion that it is reasonably foreseeable by a lender that advancing a large amount of money to a potential borrower might cause the borrower to become addicted to gambling, to become addicted to alcohol or to drugs, or to squander the money through bad management or on unsound business enterprises. Relevantly, the fact that the community includes people with Mr Politarhis’ predisposition to become compulsive gamblers, and people like him who are compulsive gamblers, did not make it reasonably foreseeable that if Westpac were to lend a large amount of money to him and Mrs Politarhis, Mr Politarhis would become a compulsive gambler. The test of reasonable foreseeability is to be applied at the time of the decision to make the advance, or at the time of the mistake by Westpac (not much later). The circumstance that it was possible that Mr Politarhis was one of those members of the community who might use the money in a way that damaged his health, by causing psychiatric injury or by exacerbating an existing gambling addiction did not make it reasonably foreseeable that such harm would occur were Westpac to lend a substantial amount of money to Mr and Mrs Politarhis.
Even if that problem were overcome, I consider that when the relevant factors are weighed, a duty of care should not be imposed on a lender of money requiring it to take reasonable care to avoid lending money to a person who, once the money is available, might use the money in a manner that causes himself psychiatric injury, or causes injury to his physical state of health.
Cole v South Tweed Heads Rugby League Football Club Limited [2004] HCA 29; (2004) 217 CLR 469 is a case in which a woman suffered severe injuries when struck by a car shortly after she left the premises of a licensed club. She had been drinking there (and possibly elsewhere) for much of the day. She claimed that the club owed her a duty of care. The High Court upheld a decision of the Court of Appeal of the Supreme Court of New South Wales, setting aside the trial judge’s decision in her favour. Two members of the majority (Gleeson CJ and Callinan J) held that the circumstances did not give rise to a relevant duty of care. The other two members of the majority (Gummow and Hayne JJ) said that there was no breach of the duty of care, even if one was owed. The two dissentients (McHugh and Kirby JJ) would have restored the trial Judge’s decision in favour of the woman. For present purposes I wish to refer only to certain observations made by Gleeson CJ which, in my respectful opinion, are relevant to the present case. He said at [14]-[15]:
[14]The significance of a need for coherence in legal principle and values, when addressing a proposal for the recognition of a new form of duty of care, was stressed by this Court in Sullivan v Moody. Although there are exceptional cases, as Lord Hope of Craighead pointed out in Reeves v Commissioner of Police of the Metropolis, it is unusual for the common law to subject a person to a duty to take reasonable care to prevent another person injuring himself deliberately. “On the whole people are entitled to act as they please, even if this will inevitably lead to their own death or injury.” This principle gives effect to a value of the law that respects personal autonomy. …
[15]Again, as a general rule a person has no legal duty to rescue another. How is this to be reconciled with a proposition that the respondent had a duty to protect the appellant from the consequences of her decision to drink excessively? There are many forms of excessive eating and drinking that involve health risks but, as a rule, we leave it to individuals to decide for themselves how much they eat and drink. There are sound reasons for that, associated with values of autonomy and privacy.
Footnotes omitted
A little later he added at [18]:
[18]The consequences of the appellant’s argument as to duty of care involve both an unacceptable burden upon ordinary social and commercial behaviour, and an unacceptable shifting of responsibility for individual choice. The argument should be rejected.
To impose a duty of care in the present case and circumstances would impose a duty of care on lenders to take reasonable care to protect borrowers from causing psychological injury to themselves by their own choice as to the use of the money borrowed. If such a duty of care were to be imposed, it seems to me that a like duty should be imposed in respect of physical harm, such as harm attributable to spending the money on alcohol or drugs, or through over-eating. Such a duty would have implications for other situations. These considerations point against the imposition of the postulated duty of care.
Mr Politarhis was capable of deciding whether or not to borrow money from Westpac. He was capable of deciding whether or not to take advantage of Westpac’s mistake. He was capable of deciding whether or not to gamble the money. Even on his own case, his gambling became pathological only after he had gambled much of the money obtained from Westpac, and even then it does not follow that he was not capable of making a choice.
To impose such a duty would be to require a lender to undertake enquiries into the past conduct of the potential borrower, and into the state of health of the potential borrower, that it would be impractical to undertake. It is one thing for a lender to make an assessment, in its own interests, of the risk of a borrower defaulting. It is another thing to require a lender to take reasonable care to find out whether a borrower might use the money loaned in a manner that is harmful to the borrower. The lending of money will then become an occasion for the collection of a lot of information, much of which most borrowers, understandably, would be unwilling to provide. To impose a duty of care of the kind invoked by Mr Politarhis would impose an unacceptable and impractical burden on lenders of money.
In my opinion, the interest which a potential borrower might have in being protected against borrowing, when to lend to that borrower might ultimately result in harm to the borrower’s health because of the manner in which the borrower uses the money, is not an interest that the law should recognise, absent at least awareness on the part of the lender of a particular vulnerability on the part of the would be borrower.
Nor, in my opinion, would the ordinary member of the community consider the borrowing of money from a lender to be an occasion for the lender to review the wisdom of the borrower’s proposed use of the money, except to the extent that the lender did so in its own interests.
There is a significant interest which must be taken into account here. It is illustrated by the decision in Reynolds v Katoomba RSL All Services Club Limited [2001] NSWCA 234; (2001) 53 NSWLR 43. In Reynolds the plaintiff claimed damages from an incorporated club, of which he was a member. The plaintiff was described as a “problem gambler”. Club employees came to know this. Despite this, club employees continued to cash cheques drawn by the plaintiff. The plaintiff lost that money by gambling on the club premises. He brought an action against the club to recover his losses, claiming that the club owed him a duty of care to protect him against financial loss from gambling. There was no finding that the plaintiff was unable to control his own actions. The claim was for financial loss, not for psychiatric injury. After considering a number of recent decisions of the High Court, Spigelman CJ summarised the position as follows at [44]-[49]:
[44]The trial judge found that the respondent knew that the appellant was a problem gambler and, in that sense, was aware of his vulnerability. Furthermore, the trial judge found that both the appellant and his father had asked the respondent to prevent the appellant gambling to excess, specifically by refusing to cash cheques.
[45]This knowledge and these requests, according to the appellant's submissions in this Court, created a duty to advise the appellant to resign from the club or to warn him whenever he appeared at the club and was gambling. There was also, it was submitted, a duty to refrain from making funds available by means of cashing his own or third party cheques.
[46]This knowledge of vulnerability must be placed in a context that the duty is to prevent the self-infliction of harm by an individual whose autonomy the common law respects. It is also to be placed in the context where the appellant had available to him other means of obtaining cash, perhaps not as immediate or convenient, but other means did exist. Furthermore, other clubs and forms of gambling were available to him.
[47]The discussion of vulnerability in the judgments in Perre v Apand Pty Ltd and Crimmins, and the authorities cited therein, place considerable emphasis on the practical inability of the injured party to take steps to protect him or her or itself, whether because of ignorance of the risk or otherwise. There was no such practical inability in the present case.
[48]It may well be that the appellant found it difficult, even impossible, to control his urge to continue gambling beyond the point of prudence. However, there was nothing which prevented him staying away from the club. The suggested duty on the club to advise him to resign his membership emphasises the point. He could have resigned at any time. The requests to refuse to cash cheques when asked, did not shift his personal responsibility for his own actions to the club. There was no reason for the club to honour one request rather than the other.
[49]In my opinion this combination of circumstances is such that no duty of care was owed of the character for which the appellant contended. The risks were obvious. As Gleeson CJ said with respect to the analogous situation of a participant in sport: "The only way to avoid risk of injury is not to play" (Agar v Hyde at 563 [18]). The appellant must accept responsibility for his own actions. There was no duty of care. There was no unconscionable conduct. The appeal should be dismissed with costs.
I respectfully agree with what he says. In the present case acknowledgement of the autonomy of the individual, and of the responsibility of the individual for decisions made and not made, are matters that tell against the imposition of a duty of care.
If the duty postulated is imposed at the stage of the making of the contract of loan, that at least puts a temporal limit on the inquiries that the lender would have to make. But at that stage Westpac had no knowledge of Mr Politarhis’ disposition to gamble, and could not reasonably have been expected to know of it. The imposition of a duty of care thereafter would appear to require ongoing supervision, at a fairly detailed level, of the conduct of the borrower. That seems quite impractical to me.
I also share the reservations of the trial Judge about imposing a duty of care, of the kind in question, alongside the contractual obligation under the loan contract, but it is not necessary to explore that point any further.
For those reasons, I agree with the trial Judge that no relevant duty of care to avoid causing psychiatric injury arose.
Even if a duty of care arose, I am not satisfied that a failure to take reasonable care was established. The Judge did not deal specifically with this point. A duty to take reasonable care could hardly require that a lender routinely investigate the possibility of every prospective borrower using the money in a manner that might cause psychiatric harm to the borrower. There was nothing in the present case known to Westpac to put Westpac on notice that it was a proper case to make some sort of enquiry, except perhaps the history of Mr and Mrs Politarhis steadily increasing their overall level of debt. But on the evidence there is every reason to think that Mr Politarhis would have had an adequate explanation for that. Indeed, Mr Politarhis does not contend that Westpac should have refused to lend money to him. His contention appears to be that it should have realised that the substantial amount that he ultimately obtained as a result of Westpac’s mistake might be productive of psychiatric injury to him. I fail to see how the relevant line is to be drawn. And the mistake that Westpac made was a mistake that disregarded its interests, not a mistake that disregarded an interest of Mr Politarhis that the law of negligence should protect. In short, I am not satisfied that a failure to take reasonable care was made out.
I also agree with the Judge’s finding that Mr Politarhis did not establish that his state of health was caused by Westpac. The cause of Mr Politarhis’ condition was his decision to take advantage of Westpac’s mistake, and to gamble with the money he obtained. Mr Politarhis is legally responsible for his own conduct. Consistently with that finding, the cause of his condition was his own choice to act as he did.
The second formulation by the Judge of the duty of care relied on was a duty on the part of Westpac to take reasonable care to avoid causing Mr Politarhis financial loss comprising his gambling losses and the related indebtedness to ACCU and to Westpac: at [60]. I consider that the complete formulation of the duty requires the duty to be expressed as one requiring Westpac to take reasonable care to avoid causing financial loss to Mr Politarhis by lending money to him in circumstances in which it was foreseeable that Mr Politarhis would lose the money by gambling.
Unless the formulation of the postulated duty is completed in that manner, the duty lacks adequate definition. The kind of financial loss, or the circumstances giving rise to the loss, must be identified as part of the formulation of the duty. As Gummow J said in Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 234 CLR 330 at [43]-[44]:
[43]Although the existence of a duty of care owed by the RTA to Mr Dederer was not in dispute, two points must be made about the nature and extent of that obligation. First, duties of care are not owed in the abstract. Rather, they are obligations of a particular scope, and that scope may be more or less expansive depending on the relationship in question. Secondly, whatever their scope, all duties of care are to be discharged by the exercise of reasonable care. They do not impose a more stringent or onerous burden.
[44]Regarding the first point, a duty of care involves a particular and defined legal obligation arising out of a relationship between an ascertained defendant (or class of defendants) and an ascertained plaintiff (or class of plaintiffs). …
Bearing in mind what Gummow J says, it may be that the postulated duty should simply refer to a lender and to a borrower, rather than to Westpac and to Mr Politarhis in particular.
When the duty is completely formulated, a number of obstacles to the imposition of a duty of care are evident. First, the duty is one that is aimed at protecting the borrower or Mr Politarhis from the consequences of their own choices. For reasons already indicated, such a duty of care would be an exceptional one. Second, it is implicit in the formulation of the duty that to gamble and to lose the money is to incur a compensable loss. This is a proposition that has startling consequences. Many people gamble for pleasure and do so in moderation. Many people gamble more than they should. It is difficult to see how expenditure or losses incurred in this way can be regarded as compensable losses unless the postulated duty is refined and limited in some way. It may be that limiting the duty of care to a lender or potential lender who is aware that the borrower is a compulsive gambler, and limiting the losses that are recoverable to losses attributable to compulsive gambling, might be the answer. But one would think that in this situation a duty should be imposed only in respect of losses attributable to a compulsion to gamble that cannot be resisted, and not to merely an entrenched habit of gambling.
In considering this formulation of the duty of care the Judge referred to the principles canvassed by the High Court in Perre v Apand. He decided that neither ACCU nor Westpac were under a duty to take reasonable care to avoid causing Mr Politarhis financial loss: at [178] and at [214].
The Judge acknowledged that there are people in the community who are addicted to certain activities, or predisposed to such addiction, and that such persons might use borrowed money to satisfy that addiction, or use it in a manner that caused the addiction to develop. Any lender must realise that there is a possibility that the borrower will be such a person. But as the Judge correctly pointed out, this in itself is not enough to give rise to a duty of care. In considering what factors or circumstances might give rise to a duty of care, the Judge referred to various factors canvassed by members of the High Court in Perre v Apand, and to the decision of the Court of Appeal of the Supreme Court of New South Wales in Reynolds.
The Judge’s consideration of this issue occurred when he was considering the claim against ACCU. He made the point that ACCU was not aware of Mr Politarhis’ gambling until December 1999, when Mrs Politarhis told an employee of ACCU that her husband was gambling. As the Judge said, there was no evidence that Westpac had any knowledge that Mr Politarhis was gambling, or had a gambling problem, until about the time it froze both accounts in March 2004.
There are several matters that were of particular significance in causing the Judge to conclude that the postulated duty of care did not exist. It was unrealistic to expect a lender to keep track of the manner in which the borrower was drawing on the money made available to the borrower: at [179]. I would go further and say that it would be impossible for a lender to supervise the borrower in this fashion. And, as I observed earlier, if one were to focus on the stage before the decision is made to lend money, it is equally impracticable to suggest that a lender should be expected to enquire into a potential borrower’s background to find out if the borrower has or is prone to a drinking problem, a gambling problem or a tendency to squander money in unwise business ventures. I mention these other possibilities because if the duty is owed in respect of persons with a gambling problem, it seems impossible to me to limit it to that particular kind of problem. The Judge said that Mr Politarhis was not in a position of vulnerability in relation to the lender: at [180]. The Judge found as a matter of fact that there were times when Mr Politarhis could act “rationally and sensibly”: at [182]. As I understand it, that finding refers to the time before ACCU and Westpac advanced money, and to the time after the advances were made. The Judge appears to have accepted that there were times when Mr Politarhis was not acting rationally. The significance of his finding is that Mr Politarhis made the decision to borrow money, and Mr Politarhis had the ability to make the decision to terminate the borrowing before all of the money was squandered, or at the least to adopt some device to prevent Mr Politarhis from squandering the money such as arranging with the lender that monies could be drawn only if Mr and Mrs Politarhis together applied to draw on the advance. In other words, there is no reason to impose on a lender a duty to protect a borrower from making unwise and indeed foolish decisions about the use of the money to be borrowed. To do so would not be consistent with the approach usually taken in this area of the law, and would be inconsistent with what Spigelman CJ referred to as the autonomy of the individual.

I add that these considerations highlight the fact that Mr Politarhis appeared to proceed on the basis that as soon as Westpac told him that $198,000 was available to him, it was an inevitable conclusion that the whole of the amount made available by mistake would be lost by gambling. The evidence does not suggest that that was the case. Even if, having gambled a substantial amount of the money, Mr Politarhis reached a point of desperation at which one might say he was no longer acting rationally, and one might say that he was incapable of arresting the process that had begun, to my mind it would still be necessary to identify some such stage before one could consider imposing liability on the lender.
I agree with the Judge’s conclusion that the duty of care of the second kind postulated did not arise. It suffices to say that there are certain factors that are more or less decisive against the imposition of any such duty. I will identify them briefly. Westpac did not know that Mr Politarhis was a gambler, or had a gambling problem. I agree that absent such knowledge, it seems impossible to impose a duty of care of the kind postulated. At the time of the borrowing Mr Politarhis was capable of acting rationally. It cannot be said that at that time he was in a position of particular vulnerability of which Westpac should have been aware. It is only in limited circumstances that the law imposes a duty to take reasonable care to protect competent adults from decisions made by them. There is the problem of equating gambling losses with a compensable loss, to which I have already referred. There is the circumstance that Mr Politarhis was in at least as good a position as Westpac to protect himself against the likelihood of loss through gambling. There is the circumstance that there is no indication of any reliance by Mr Politarhis on Westpac to protect his interests. Westpac had no means of control over the conduct of Mr Politarhis. It is impractical to postulate a duty which requires a lender to ascertain, before agreeing to lend, whether the potential borrower has a tendency or condition that is likely to lead to the borrowed money being squandered.
For those brief reasons I agree with the Judge.
In any event, Mr Politarhis did not establish a failure on the part of Westpac to take reasonable care to identify him as a problem gambler, or as a person with a tendency towards a gambling addiction. He did not point to anything that Westpac reasonably could or should have done that would have led it to ascertain this.
Nor did Mr Politarhis establish that Westpac caused him to suffer loss. Of course he could not have gambled to the extent that he did had not Westpac agreed to lend him the money in question. But in my opinion the relevant cause of his gambling and of his losses was his own conscious decision to take advantage of the mistake by Westpac, to draw down on the line of credit and then to gamble with the money. Making the money available by mistake was not relevantly causative.
Even if Mr Politarhis had established that a duty of care was owed, that the duty was breached and that the breach of duty caused him compensable loss, there remains the question of quantifying the loss. Understandably, the Judge did not attempt to assess damages: [290]. However, it should be noted that the money due under the first loan could not be treated as a compensable loss, as I think Mr Politarhis accepts. As to the second loan, my understanding is that some of the money must have been spent on living expenses, because Mr Politarhis gave evidence that he transferred money from the second loan account to the first loan account so that Mrs Politarhis would not realise what he was doing. Moreover, as I have already said, even if at some point the compulsion to gamble became so strong that it should be treated as irresistible, and money gambled should be treated as a compensable loss, even on Mr Politarhis’ case it appears that that point was not reached until some time in 2004. If damages were to be assessed, these difficulties would have to be addressed.
I am satisfied that a claim for damages for breach of contract cannot succeed. Mr and Mrs Politarhis appear to treat the mistaken advance of money by Westpac as a breach of contract. I doubt whether it is. The failure by Westpac to apply the money available under the second loan to discharge or pay out the first loan had no operative effect of itself. It was the decision by Mr Politarhis, knowing of the mistake by Westpac, to draw on the second line of credit beyond an amount of $18,000 that put the money in his control. I do not consider that Westpac was in breach of its contract with Mr and Mrs Politarhis by making the advance that it made.
In any event, it was not reasonably foreseeable that a failure by Westpac to apply the money to discharge the first loan would lead to the amount ultimately advanced being lost through gambling, even if such losses can be treated as a compensable loss.
It follows that the Judge was right to dismiss the claim by Mr Politarhis.
Appeal against the dismissal of Mrs Politarhis’ claim
The Judge was right to dismiss the cross-claim by Mrs Politarhis.
There is no doubt that Mr Politarhis’ gambling, and the adverse consequences on his health of that gambling, had an adverse effect on Mrs Politarhis. The Judge was not prepared to find that she had suffered a psychiatric illness: at [223]. Nor did he accept that Westpac, in the circumstances, owed her a duty to take reasonable care not to cause her psychiatric injury by making available to her husband more than an additional $18,000, or a duty to take reasonable care to protect her from financial loss as a result of the additional money being made available to Mr Politarhis and him losing that money through gambling: at [225].
I agree with the Judge. A duty of care of a kind necessary to sustain a claim by Mrs Politarhis was not owed by Westpac, nor was there proof of breach of such a duty nor proof that the actions of Westpac caused Mrs Politarhis injury or loss.
Defences raised by Westpac
Westpac pleaded by way of defence that Mr Politarhis did not commence his proceedings against Westpac within three years after his cause of action accrued. Westpac in that respect relies on s 36 of the Limitation of Actions Act 1936 (SA) (“the Act”) which provides as follows:
36    Personal injuries
(1)     All actions in which the damages claimed consist of or include damages in respect of personal injuries to any person, shall be commenced within three years next after the cause of action accrued but not after.
(1a)   However, in the case of a personal injury that remains latent for some time after its cause, the period of 3 years mentioned in subsection (1) begins to run when the injury first comes to the person's knowledge.
(2)     In this section –
personal injuries include any disease and any impairment of a person's physical or mental condition.
Westpac did not plead s 36 in defence of the claim by Mrs Politarhis.
No submissions on appeal were directed to the question of whether s 36 of the Act applies to the claim by Mr Politarhis for financial loss. If it does not, then the time limit for that claim appears to be six years: see s 35 of the Act.
Mr Politarhis commenced his proceedings against Westpac on 1 March 2007. He drew on the funds available under the second loan from December 2003 until the loan accounts were frozen on 29 March 2004. Assuming that the relevant cause of action is based on the mistaken advance of moneys in excess of the additional $18,000 that was intended, his claim is out of time in relation to advances made before 1 March 2004, but within time in respect of advances made thereafter. The Judge noted that at the end of February 2004 the debit balance on the second loan account was $112,999.11, and as at 29 March 2004 was $153,520.81. That suggests that the claim is within time in relation to advances amounting in all to about $40,000. But, as I have already noted, it may be that the claim for financial loss was not out of time in any event.
The position in relation to the claim for psychiatric injury is less clear. If the onset of a psychiatric injury is the basis of the cause of action, it will be necessary to decide when that onset occurred. On the Judge’s findings, Mr Politarhis was a compulsive gambler before Westpac agreed to the second loan. But if the gambling of the money mistakenly advanced caused an exacerbation of his condition, accompanied by an exacerbation of his depression and tendency to consume marijuana, it may well be that a compensable event occurred after 1 March 2004.
If Mr Politarhis’ claim were otherwise to succeed, it would be necessary to hear further submissions on those matters and to consider whether this Court should remit the matter to the trial Judge for further findings to enable the impact of the time limit to be decided.
No submissions were addressed to these issues on appeal.
Mr Politarhis challenged the availability of the defence pleaded by Westpac. I set out above the provisions of s 36(1a). Mr Politarhis argued that his condition was latent until within three years before the institution of the proceedings. The Judge rightly rejected that submission. The conditions upon which Mr Politarhis relied manifested themselves throughout the relevant events. The fact that Mr Politarhis might not have known the precise medical diagnosis is neither here nor there.
Mr Politarhis invoked the provisions of s 45 of the Act, which section provides as follows:
45    Persons under legal disability
(1)     Where the time for bringing an action or proceeding is limited by this Act, or any other Act or law, and the person who is entitled to bring the action or proceeding is under a legal disability, the time for bringing that action or proceeding shall, subject to subsection (3) of this section, be extended by the period or periods for which the disability exists or continues after the time at which the right to bring the action or proceeding arose.
(2)     For the purposes of this section a person is under a legal disability in relation to an action or proceeding while he remains a child or while he is subject to a mental deficiency, disease or disorder by reason of which he is incapable of reasoning or acting rationally in relation to the action or proceeding that he is entitled to bring.
(3)     No period of limitation shall be extended by this section to more than thirty years from the time at which the right to bring the action or proceeding arose.
Mr Politarhis argued that he was under a legal disability for the purposes of s 45 for a substantial period before he instituted his proceedings in March 2007. On this basis he argues that time began to run only shortly before he commenced the proceedings: at [238]. In his submissions on appeal Mr Politarhis referred the Court, with understandable feeling, to the evidence about his mental and physical state of health at various times during 2004 and 2005. The Judge canvassed the relevant evidence briefly: at [238]-[242]. He appears to have accepted that at various times during 2004 and 2005 Mr Politarhis was in poor health, physically and mentally, but to have concluded that Mr Politarhis had not established that he was “incapable of reasoning or acting rationally in relation to the action”, except perhaps for short periods of time. The Judge relied on material indicating that during the period in question Mr Politarhis “… was able to (and did) act adaptively and appropriately in relation to the situation which he and his family then faced”: at [240]. There is considerable force in the submission made by Mr Politarhis relating to his state of health at certain times during 2004 and 2005. If this were the only obstacle to his success, I would want to hear further submissions on this point. On appeal the submissions by Mr Politarhis did not go near identifying the periods in respect of which he might have been under a legal disability. Having regard to the fact that his claim fails in any event, it is not necessary at this stage to pursue the issue any further.
Mr Politarhis applied for an extension of time in any event, relying on s 48(1) of the Act. The Judge rejected that application, finding that Mr Politarhis had not ascertained facts material to his case within 12 months before the commencement of the proceedings, as required by s 48(3)(b)(i). It suffices to say that I agree with the Judge on this point.
It follows that were the claim by Mr Politarhis otherwise to succeed, there are some aspects of the application of the Act which would call for further consideration by this Court on appeal, and perhaps by the trial Judge. But in the circumstances that need not be done.
Appeal against the order for possession
By cross-action Westpac sought an order that the plaintiffs give up possession of their home at Reynella to enable Westpac to sell the property with a view to recovering the moneys secured by its mortgage over the property.
The Judge considered in some detail the statutory provisions governing the making of such an order, and found in favour of Westpac.
On appeal, Mr Politarhis did not point to any error on the part of the Judge, subject to one matter to which I will come in a moment.
It suffices to say that there appears to be no obstacle to the making of the order that the Judge made.
The one matter that calls for comment is an accounting exercise undertaken by Westpac which was referred to as the “regularisation” of the loan accounts.
When Mr Politarhis informed Westpac of its mistake on 29 March 2004, the balance owing under the first loan was $179,990.78 and the balance on the second loan was $153,520.81. Westpac froze both accounts that day. Thereafter, only interest and fees have been debited to either account.
On 24 January 2006, the solicitors for Westpac wrote to solicitors then acting for Mr and Mrs Politarhis. They referred to the amount outstanding under each of the loans, which by then had increased. The letter stated that Westpac proposed to debit to the second loan account an amount that would bring the second loan account to the originally agreed limit of $198,000, and to credit an equivalent amount to the first loan account, thereby reducing the amount owing under the first loan. In effect, Westpac was proposing to do, to a limited extent, what had been proposed, namely, to use the line of credit available under the second loan to reduce the amount owing under the first loan.
The letter from the solicitors stated that unless objection was made, they would assume that Mr and Mrs Politarhis had no objection to this being done.
The Judge found that no objection was made: at [275].
The Judge noted that these book entries or accounting entries did not alter the overall indebtedness to Westpac, nor did Westpac gain any advantage in terms of interest, because the same interest rate was applicable to each loan: at [276].
The Judge concluded that Westpac was entitled to proceed as it did, and found further that there was nothing unconscionable in what it did: at [280]-[282]. The Judge reasoned that Westpac was entitled to apply moneys advanced under the second loan to discharge the indebtedness under the first loan to the extent possible. He rejected a submission by Mr Politarhis that Westpac was entitled to make adjusting book entries of the kind in question only if to do so would wholly discharge the amount owing in respect of the first loan. I agree with the Judge’s approach. Quite apart from that it appears to me that as the amount owing under the first loan and under the second loan was secured by the mortgage, and as both amounts were owed by the plaintiffs to Westpac, and as Westpac gained no advantage from making the book entries, there was no obstacle to Westpac acting as it did.
This was the only aspect of the possession claim addressed by Mr Politarhis on appeal. I do not accept his submission that the action that Westpac took deprived it of its entitlement to an order for possession.
Conclusion
The appeals by Mr Politarhis and Mrs Politarhis should be dismissed.
SULAN J: I would dismiss the appeals of Mr Politarhis and Mrs Politarhis. I agree with the reasons of the Chief Justice.
VANSTONE J: I agree with the orders proposed by the Chief Justice and with the reasons he has written.