Politarhis v Westpac Banking Corporation; Politarhis v Australian Central Credit Union Ltd

[2008] SASC 296

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

POLITARHIS v WESTPAC BANKING CORPORATION; POLITARHIS v AUSTRALIAN CENTRAL CREDIT UNION LTD

[2008] SASC 296

Judgment of The Honourable Justice White

31 October 2008

BANKING AND FINANCE - BANKS - DUTIES OF BANKS - OTHER MATTERS

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE

LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - WHAT STOPS OR SUSPENDS THE RUNNING OF TIME

The plaintiff and his wife (the plaintiffs) were, at different times, members of Australian Central Credit Union (ACCU) and customers of Westpac Banking Corporation (Westpac). Following mistakes by each, the plaintiff was twice able to access credit to which he was not entitled. Much of that credit was used, and ultimately lost, by him through gambling.

The plaintiff’s principal claim against each defendant is that his access to the credit caused him both financial loss and various psychological and psychiatric conditions including pathological gambling, drug addiction, depression and paranoia. He also alleges that policies of ACCU which would have limited his access to the credit were not enforced and that ACCU acted either negligently or unconscionably by reporting the plaintiffs’ overdue loan to a credit reporting agency. The plaintiff claims damages against each defendant for his financial loss and for his psychological and psychiatric conditions.

By cross-action, Westpac seeks an order for possession of the plaintiffs’ property which was mortgaged to secure its loan. In turn, the plaintiff's wife brings a cross-action against Westpac seeking damages for the financial loss and damage to her own physical and mental health said to have been caused by the plaintiff’s use of the credit which it mistakenly made available.

Whether the plaintiff’s actions are time barred – whether ss 36(1a) or 45 of the Limitation of Actions Act 1936 (SA) (LAA) have the effect that the plaintiff’s claims were commenced within the three year limitation period – whether the plaintiff is entitled to an extension of time under s 48 of the LAA – whether ACCU breached its policies by advancing more than $2,000 to the plaintiff on any one day and by allowing him to make withdrawals without producing appropriate identification – whether ACCU and Westpac owed the plaintiff a duty of care to avoid causing or exacerbating his psychological or psychiatric conditions – whether ACCU and Westpac owed the plaintiff a duty of care to avoid causing him financial loss – whether ACCU’s conduct in reporting the plaintiff to a credit reporting agency amounts to negligence or unconscionable conduct – whether Westpac owed a duty of care to the plaintiff’s wife to prevent the psychiatric illness and financial loss she claims have been caused by her husband’s actions – whether Westpac acted unconscionably in “regularising” the two accounts of the plaintiffs – whether Westpac is entitled to an order for possession of the plaintiffs’ property.

Held: Neither s 36(1a) nor s 45 of the LAA have any operation in the plaintiff’s circumstances – plaintiff not entitled to an extension of time under s 48 of the LAA – plaintiff’s claim against ACCU is out of time - plaintiff’s claim against Westpac, insofar as it claims damages for conduct occurring before 1 March 2004, is out of time – ACCU did not have, and therefore did not breach, the policies alleged by the plaintiffs – the plaintiff’s pathological gambling and other psychological or psychiatric conditions were neither caused nor exacerbated by ACCU or Westpac’s mistaken provision of credit to him – neither ACCU nor Westpac was under a duty to take reasonable care to avoid causing the plaintiff financial loss – neither ACCU nor Westpac caused the financial loss – ACCU did not owe the plaintiffs a duty of care to refrain from reporting their overdue loan payments to a credit agency – ACCU’s conduct in reporting the plaintiffs to a credit reporting agency did not amount to unconscionable conduct - Westpac did not owe the plaintiff’s wife a duty to avoid causing the plaintiff financial loss or psychiatric or psychological conditions so as to avoid causing her financial loss or mental injury – each of the plaintiff's claims dismissed - the plaintiffs have defaulted on their mortgage with Westpac – Westpac did not act unconscionably or inappropriately in the “regularisation” of the two accounts – Westpac entitled to an order for possession of the plaintiffs' property.

Limitation of Actions Act 1936 (SA) s 36, s 45 and s 48; Workers Rehabilitation and Compensation Act 1986 (SA); Financial Institutions (Application of Laws) Act 1992 (SA) s 8; Civil Liability Act 1936 (SA) s 33; Law Reform (Ipp Recommendations) Act 2004 (SA) s 76, Schedule 1; Dust Diseases Act 2005 (SA) Schedule 1; Real Property Act 1886 (SA) s 132 and s 133; Law of Property Act 1936 (SA) s 55A, referred to.
Tame v State of New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44; Perre v Apand Pty Ltd (1999) 198 CLR 180; Sullivan v Moody (2001) 207 CLR 562; Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43; March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; Van Den Heuvel v Tucker (2003) 85 SASR 512; Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] 1 AC 80; Robinson v Craven (1994) 63 SASR 267; Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471; The Commonwealth v Verwayen (1990) 170 CLR 394; Roads and Traffic Authority v Royal (2008) 82 ALJR 870; Lamshed v Plakakis (1988) 47 SASR 316; Kirkman v Frost (1978) 20 SASR 192; Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447, applied.
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32; Joachimson v Swiss Bank Corporation [1921] 3 KB 110, discussed.
Radin v Commonwealth Bank of Australia [1998] FCA 1361; NMFM Property Pty Ltd v Citibank (No 10) (2000) 186 ALR 442; National Australia Bank Ltd v Nemur Varity Pty Ltd (2002) 4 VR 252; Lomsargis v National Mutual Life Association of Australasia Ltd (2005) 2 Qd R 295; Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540; Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310; Galoo Ltd v Bright Grahame Murray [1995] 1 All ER 16; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; McGhee v National Coal Board [1972] 3 All ER 1008, considered.

POLITARHIS v WESTPAC BANKING CORPORATION; POLITARHIS v AUSTRALIAN CENTRAL CREDIT UNION LTD
[2008] SASC 296

Civil

Table of Contents

Introduction..................................................................................... [1]
Preliminary Findings of Fact............................................................. [9]

The Plaintiff’s Background.......................................................... [10]
Relationship with ACCU............................................................. [17]
Relationship with Westpac.......................................................... [30]

Outline of the Plaintiff’s Claim Against ACCU.................................. [42]
Outline of the Plaintiff’s Claim Against Westpac............................... [62]
Assessment of the Plaintiff................................................................ [68]
Assessment of Mrs Politarhis........................................................... [75]
Determination of the Claim Against ACCU...................................... [78]

Liability of ACCU: General Approach......................................... [78]
The Membership Relationship..................................................... [83]
The Loan Contracts.................................................................... [87]
The Common Law Duty of Care: Mental Injury........................... [92]
The Common Law Duty of Care: Economic Loss........................ [105]
The Claim of a Daily withdrawal Limit......................................... [114]
Proper Documentation for Withdrawals....................................... [140]
The Claim of Mental Injury......................................................... [151]
The Claim for Financial Loss....................................................... [175]

No Duty................................................................................ [178]
No Causation......................................................................... [189]

The Report to Baycorp Advantage.............................................. [206]

Determination of the Claim Against Westpac.................................... [212]
The Claim by Mrs Politarhis............................................................. [220]
Time limitation Defences.................................................................. [228]

Section 36(1a) – A Latent Condition........................................... [234]
Section 45 – Incapacity.............................................................. [237]
An Extension of Time.................................................................. [244]

Westpac’s Application for an Order for Possession.......................... [257]

Westpac’s “Regularisation” of the Accounts................................ [270]
Section 55A(3) of the LPA......................................................... [285]

Other Matters................................................................................. [290]
Conclusion...................................................................................... [291]

WHITE J:

Introduction

1. The plaintiff is a compulsive gambler.  As a result of separate mistakes by Australian Central Credit Union Ltd (ACCU) and Westpac Banking Corporation (Westpac) he and his wife were twice given access to large amounts of credit to which they were not entitled.  The plaintiff made use of that credit to obtain cash which he squandered in gambling.  Most of the gambling involved betting on horses using the TAB.

2. The plaintiff claims that his access to, and use of, the credit provided by ACCU and Westpac has caused his gambling to become pathological, drug addiction, various psychological conditions including depression and paranoia, and other adverse affects to his health.  He seeks substantial damages from each defendant in respect of these conditions and also for the financial losses which he says he has suffered.

3. The plaintiff also claims damages from ACCU in respect of its failure to enforce a limitation which he asserts applied at relevant times on the maximum amount of cash which could be withdrawn each day, and in respect of its failure to insist that he produce formal evidence of his identity on each occasion that he made a withdrawal.  The plaintiff claims that if the daily withdrawal limit and formal identification policies had been enforced, he would not have been able to obtain access to cash at all, or at least in the quantities which he did. This would have prevented him gambling irresponsibly or, alternatively, would have limited his losses whenever he did gamble.  He also claims relief from each of ACCU and Westpac in respect of certain of their conduct once they became aware of their respective mistakes, in particular, the conduct of Westpac in “regularising” its accounts.

4. Each of ACCU and Westpac dispute their liability to the plaintiff and raise a number of grounds of defence.  They raise, in the alternative, pleas of contributory negligence and a failure by the plaintiff to mitigate his loss.

5. By cross-action, Westpac seeks an order for possession of the property used to provide security for its loan.  In answer to that claim, the plaintiff’s wife (Mrs Politarhis) brings her own cross-action asserting an entitlement to damages in respect of the damage to her own physical and mental health and financial loss which she alleges resulted from Westpac making the credit available to her husband.

6. Although Mrs Politarhis is not a plaintiff in either action, I will, when referring to the plaintiff and Mrs Politarhis jointly, describe them as “the plaintiffs”.  When referring to Mrs Politarhis singly, I will use the expression “Mrs Politarhis”.

7. The plaintiff commenced the proceedings against Westpac on 1 March 2007 and the proceedings against ACCU on 5 March 2007. Each of Westpac and ACCU pleads a time limitation defence. The plaintiff disputes that his claims are time barred but, in the alternative applies under s 48 of the Limitation of Actions Act 1936 (SA) (LAA) for an extension of time in which to commence each action.

8. The two actions were heard together.  The plaintiffs were unrepresented throughout.  Both their pleadings and the presentation of their respective cases reflected the lack of legal representation.

   Preliminary Findings of Fact

9. Before outlining more precisely the claims which the plaintiff makes and addressing the issues which arise for determination, I make some preliminary findings of fact about the plaintiff and his background, the circumstances in which the mistakes by ACCU and Westpac occurred, and the events which followed the plaintiff making use of the credit which was mistakenly made available to him.

   The Plaintiff’s Background

10. The plaintiff was born in Turkey in 1955.  He came to Australia when he was eight years old with his mother.  They reunited with his father who had come some years earlier.  The remainder of his upbringing and education was in Australia.  He left school after completing Year 11 in Darwin.

11. Between 1977 and 1989, the plaintiff was a member of the RAAF.  He worked as an instrument fitter.  Following his discharge, the plaintiff commenced employment in January 1990 with British Aerospace Australia Limited as an electronics tradesman.  He was employed by that company until 3 July 1995.  However, in late 1992, the plaintiff suffered an injury to his neck which incapacitated him, sometimes wholly and sometimes partially.  He was paid compensation under the Workers Rehabilitation and Compensation Act 1986 (SA) (WRCA). His employment between late 1992 and the time of the termination of his employment was marked by absences from work, returns to work on alternative duties, and attempts at rehabilitation.

12. Shortly after the termination of his employment, the plaintiff underwent a C6-7 anterior cervical fusion.  That surgery was apparently successful in alleviating his symptoms to a significant extent.

13. Between July 1995 and October 1996 the plaintiff was unemployed.  In October 1996 he obtained part-time work as a telemarketer.  He continued with that work (albeit with two different employers) until 5 August 1998 when he obtained full-time employment with AEC Products Pty Ltd as a pager technician.  He remained employed by AEC Products until 23 April 2004.  His employment with AEC Products was marked by absenteeism associated with his gambling.

14. The plaintiff has not engaged in paid employment at all since April 2004.  He has been in  receipt of a disability pension since 15 October 2004.

15. The plaintiffs married on 13 August 1984.  It was the plaintiff’s second marriage, his first having survived for 17 days only.  It is plain that the plaintiff is the dominant partner in their relationship.  The plaintiffs have three children, two sons in their low 20s and a daughter who was born in 1989.

16. In August 1989, the plaintiffs purchased a house at Reynella.  They have lived in the house ever since.  It is this property which was mortgaged to provide security for their borrowings.  It is in respect of this property that Westpac seeks an order for possession.

    Relationship with ACCU

17. ACCU is incorporated under the Financial Institutions (South Australia) Code.[1]  At relevant times, it was a financial cooperative which could lend money only to persons who were its members.  ACCU provides services to its members through a number of branches located in metropolitan Adelaide, including branches at Noarlunga, Marion and in Light Square in the City of Adelaide.

    [1]   As established in the Financial Institutions (Application of Laws) Act1992 (SA) s 8 (since repealed).

18. On or about 25 October 1993, the plaintiffs became members of ACCU.  At the same time they borrowed $22,000 from the ACCU for “debt consolidation and home improvements”.  That loan was a conventional principal and interest loan, ie, the sum of $22,000 was advanced fully at the commencement of the loan with provision for monthly repayments over a 20 year term.  The loan was secured by a mortgage over the Reynella property.

19. In January 1998 the plaintiffs borrowed a further $20,000 from ACCU.  However, from that sum the remaining indebtedness under the earlier loan was discharged, providing the plaintiffs, in effect, with additional borrowings of a little over $8,000.  That too was a principal and interest loan.

20. In April 1999, the plaintiffs applied to ACCU for a line of credit of $35,000.  The plaintiff was familiar with the features of a line of credit because he had been selling that kind of financial product in one of his jobs as a telemarketer.  The line of credit differed from the previous principal and interest loans in that the $35,000 was available to be drawn down as and when required by the plaintiffs, ie, in one lump sum, or progressively.  Interest was payable only on the aggregate amount which had from time to time been drawn down.  The plaintiffs were required to make regular monthly payments of an amount equal to the amount of interest which had been debited to the account in the previous month.  The application for a line of credit was successful.  The plaintiffs signed a written contract of loan on 6 May 1999 and the line of credit became available from 14 May 1999 in Account No 61492915. This loan was secured by a mortgage over the Reynella property.

21. From the credit of $35,000, the sum of approximately $20,000 was transferred to discharge the existing principal and interest loan.  Over the three month period commencing on 14 May 1999 the plaintiffs made a series of withdrawals from the account and the credit limit of $35,000 was reached on 13 August 1999.  The account was then “replenished” by the deposit of the settlement monies from a worker’s compensation claim of Mrs Politarhis ($21,242.13) on 23 August 1999.  However, further withdrawals meant that the credit limit was reached again two months later on 21 October 1999.

22. In December 1999, at the request of the plaintiffs, ACCU agreed to increase the limit on the line of credit to $55,000.  The plaintiffs entered into a new loan contract on 2 December 1999 for this purpose.  Withdrawals from the account during December 1999 and January 2000 had the effect that this new credit limit was reached on 17 January 2000.

23. The plaintiffs applied for a further increase in the line of credit in January 2000, this time to $85,000.  However, ACCU declined to increase the limit.  An internal ACCU document indicates that the application was declined because of the plaintiff’s “suspected gambling problem”.

24. The plaintiffs then (on 24 February 2000) obtained a line of credit of $90,000 from the Savings and Loans Credit Union (SLCU).  From that sum, $55,295.20 was paid to ACCU to discharge the plaintiffs’ liability to it.  Similarly, the mortgage securing their indebtedness to ACCU was discharged and the plaintiffs mortgaged the Reynella property to SLCU.

25. The plaintiff said that he and his wife had sought the line of credit from SLCU because they wished “to transfer our loan somewhere else”.  I am satisfied that neither ACCU nor the plaintiffs contemplated that, on repayment of the amount drawn down on the ACCU line of credit and the discharge of the mortgage to it, that that line of credit would continue to be available.

1. The plaintiffs did not resign their membership of ACCU and did not close their account with it. Upon the payment of the $55,295.20 from SLCU, that account had a credit balance of $115.26.  However, ACCU overlooked removing the credit limit on the account.  The effect of this was that ACCU’s electronic account records continued to indicate that credit of $55,000 was available on the account.  That credit was unsecured.  The first monthly statement issued to the plaintiffs by ACCU after the discharge of the mortgage showed that their indebtedness had been discharged (by the transfer from SLCU) but that the credit limit of $55,000 continued to be available.  Mrs Politarhis did not see that statement or any subsequent statements.  This was because the plaintiff had (with effect from July 1999) caused the monthly account statements to be sent to him at his employer’s address, and he kept them from her.  He did this so that his wife would not find out that he had been gambling their money.

2. The plaintiff noticed that the account statement indicated that the credit limit of $55,000 still applied.  He found that he could access funds from the ACCU account in the same way that he had prior to the “transfer” of the loan to SLCU.  He did not alert ACCU to this circumstance.  In the period between 20 March 2000 and 8 May 2000 he withdrew approximately $50,000 in cash which he used for gambling.

3. The plaintiff consulted a financial counsellor in early 2000.  This was Mr Glenn at the Adelaide Central Mission Financial Counselling Service.  In late April 2000 the plaintiff was admitted to Flinders Medical Centre (FMC) and later to Glenside Hospital, following an episode of self harm.  Mrs Politarhis found out at this time that the plaintiff had been accessing credit from ACCU.  Although the plaintiff promised her that he would not gamble again he did not keep his promise, and on 8 May 2000 withdrew $21,000 from the ACCU account and lost it in gambling.  On 17 May 2000 the plaintiffs authorised Mr Glenn to inform ACCU of what had occurred.  Mr Glenn did this on 19 May 2000 and ACCU put an immediate freeze on their account.  There have been no further withdrawals from the account since that time.  The plaintiffs have not made any payment to ACCU since that date.

4. The deposits into and withdrawals from the accounts of the plaintiffs at ACCU are recorded in Exhibit AD40.

   Relationship with Westpac

5. After May 2000, the plaintiffs continued their borrowings from SLCU until April 2003.  Their borrowings increased progressively (on applications by the plaintiffs) from the initial $90,000 to $110,000 in November 2000, $140,000 in August 2001, and $160,000 in December 2002.  These increases in borrowings were prompted principally by the plaintiff’s gambling.  However, some of the monies ($18,290.34) were used on 28 August 2001 to discharge the plaintiffs’ Defence Forces Home Loan.

6. In March 2003 the plaintiffs applied to Westpac for an “Equity Access Loan” of $180,000.  That was a line of credit.  Westpac granted that facility and it became available to the plaintiffs on 17 April 2003 in Account No 75-7497.  The mortgage of the Reynella property to SLCU was discharged and the plaintiffs granted a mortgage to Westpac to secure the borrowings.  Approximately $165,000 of the $180,000 was used to discharge their indebtedness to SLCU, leaving them with available credit of approximately $15,000.  Withdrawals from the account 75-7497 had the effect that the credit limit of $180,000 was reached by 1 July 2003.

7. In late November 2003 the plaintiffs applied to Westpac for an increase in their line of credit to $198,000.  That application, like the application in March 2003, was made through a finance broker, Assured Home Loans.  Westpac agreed to the increase.  The increase was effected by the plaintiffs entering into a new loan agreement on 9 December 2003 for a line of credit of $198,000, and by Westpac establishing a new loan account.  The loan agreement described the predominant purpose of the loan as “refinancing”, the security as the existing mortgage over the Reynella property, and authorised Westpac to apply the new loan to discharge the first loan. This would have left approximately $18,000 of additional credit available to the plaintiffs. This was the mutual contemplation of all parties. However, when the new loan was established on 9 December 2003 (Account No 99-2925), Westpac overlooked effecting the transfer of funds from the new account to discharge the plaintiffs’ indebtedness under account 75-7497, and then closing that account.  The effect of that was that the old account, with a credit limit of $180,000, continued in existence simultaneously with the new account with its credit limit of $198,000.  Thus, the plaintiffs had access to credit of $378,000 instead of $198,000, ie, instead of access to an additional $18,000, the plaintiffs had access to additional credit of $198,000.

8. Mrs Politarhis was unaware of those circumstances.  She did not become aware of them until the end of February 2004, in circumstances which will be described shortly.

9. The plaintiff became aware of Westpac’s mistake in late December 2003.  He made some withdrawals from the new account to discharge existing credit card and store card debts.  He was surprised to find that he was able to withdraw more than $18,000 for that purpose.  Being curious, he telephoned the Westpac Customer Service Centre (a 1300 number) and asked for the balance in his account.  What followed appears from the following passage of his evidence:

   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.

10. As can be seen, the plaintiff thought that “all [his] Christmases had come at once”.  It is apparent that he then acted to take advantage of the situation which Westpac’s mistake created and, further, to prevent his wife from learning of what had occurred.  The plaintiff did not seek an explanation from Westpac for being able to withdraw more than $18,000.  Nor did he alert Westpac to its mistake in allowing the two accounts to remain open and in making credit of $198,000 available without discharging the first loan.

11. In the period from late December 2003 to 29 March 2004, the plaintiff progressively withdrew cash totalling approximately $150,000 from the new account.  Most of that money was used for gambling and was ultimately lost.

12. On about 23 February 2004, the plaintiff flew to Melbourne intending to place a substantial bet on a horse running in a race at Caulfield.  However, the horse was scratched.  The plaintiff returned to Adelaide without placing other bets and told his wife in general terms of what had occurred.  He told his wife that Westpac had made a mistake similar to that of ACCU and that he had been accessing funds for gambling.  This was when Mrs Politarhis first learnt of Westpac’s mistake and of her husband’s activities.  Until that time, the plaintiff had, by a variety of stratagems, kept his activities secret from her.  Mrs Politarhis retrieved approximately $20,000 in cash from the plaintiff and caused that to be paid back into the new Westpac account.  After that deposit, the debit balance on the new account was $112,999.11.  However, Mrs Politarhis did not report the matter to Westpac at that time and, apart from pleading with her husband to cease his gambling and use of the money, did not take any other action.  The plaintiff had threatened to kill himself and their children if she did so.  I am satisfied that she was persuaded by the plaintiff  not to make a report  to Westpac.

13. The plaintiff continued to withdraw monies for gambling.  By 29 March 2004 the debit balance of the new account was $153,520.81.  On that day, the plaintiff informed Westpac of what had occurred and an immediate freeze was placed on both accounts.

14. Since 29 March 2004 there have been no further withdrawals on either of the two Westpac accounts.  The plaintiffs have not made any payment to Westpac since that date.

15. On 8 March 2006 Westpac “regularised” the two accounts. The “regularisation” involved the debiting of the new account (No 99-2925) with an amount ($19,947) which brought the total indebtedness under that account to $198,000, and crediting the old account (No 75-7497) with that amount, thereby reducing the plaintiffs’ indebtedness under the old account. The circumstances of that “regularisation” will be described more fully later as they give rise to the plaintiff’s claim that Westpac has acted unconscionably.

16. The deposits into and withdrawals from the two Westpac accounts are recorded in the Westpac account statements (Exhibit AD40).

    Outline of the Plaintiff’s Claim Against ACCU

17. I described earlier in general terms the nature of the plaintiff’s claims.

18. In his statement of claim against ACCU, the plaintiff asserts that in mid 1999 he was a person in full time employment with no history of any gambling problems or drug addiction.  He acknowledged that he did have an interest in betting on horse races, but asserted that his betting had never been  something which he could not control.  The plaintiff claims that “the seeds of [his] destruction and ruin were sewn” by the conduct of ACCU commencing in about the middle of 1999 and “came to fruition” as a result of Westpac’s conduct during 2003 and 2004. Other evidence indicates that the conduct of ACCU of which the plaintiff complains commenced in August 1999.

19. The plaintiff claimed that ACCU had a policy of limiting a member’s daily cash withdrawals to $2,000 (unless the member had given prior notice that withdrawal of a greater amount was required).  However, in August 1999 he found that a number of branches did not enforce this policy.  He exploited this by frequently making drawings on the one day of amounts exceeding $2,000.  He did this to obtain the funds with which to bet to recoup losses made from earlier gambling.  With the ready availability of cash, he said that his appetite for gambling increased to the point that it became compulsive, like an addiction.  At the same time, his psychological state deteriorated and he developed “depression, panic and uncertainty”. 

20. The plaintiff said that at some stage in 1999 his wife “confiscated” his credit and access cards so as to prevent him making use of the ACCU line of credit.  He then used his driver’s licence until his wife “confiscated” that as well.  It is not clear when these events occurred, but it seems, on the plaintiff’s case, that it was in the latter part of 1999.  After the “confiscations”, the plaintiff says that he found that he could still withdraw cash without presenting formal evidence of identification by presenting a gas or electricity account, or simply by giving the account number to a teller who recognised him.  Furthermore, he found that he could continue to withdraw amounts which exceeded $2,000 on any one day in this fashion.  By this means, he continued to obtain money for gambling.

21. The plaintiff claims that at the time he and his wife obtained the loan from SLCU in February 2000, he was “significantly out of pocket and back with a significant mortgage and nothing else to show for it except fluctuating depression, psychotic episodes and sense of hopelessness, not to mention by now a compulsive illness and dependence”.  This was his condition when he received the monthly statement from ACCU in March 2000 and saw that, despite the “transfer” of the loan to SLCU, a credit limit of $55,000 was still shown as applying to the account.  He said that this “caused confusion, panic, fear and delusions about winning it all back and [that he] could not control the irresistible urges or the compulsion”.  He decided to make use of the credit and did so for the purposes of gambling. 

22. As noted earlier, between 20 March 2000 and 8 May 2000, the plaintiff withdrew approximately $50,000 from the ACCU account and used it for gambling.  While doing this, his psychological state deteriorated.  On 26 and 27 April 2000 he was treated at FMC following a drug overdose.  FMC diagnosed depression associated with his gambling.  The plaintiff was also admitted (apparently) to Glenside Hospital for three to four days, but there was no evidence about that admission.

23. In early May 2000 the plaintiff made further substantial cash withdrawals from the ACCU account.  I accept that the plaintiff made withdrawals of $2,000 on 3 May 2000, $1,500 on 4 May 2000, and five withdrawals totalling $21,000 on 8 May 2000.  I also accept that these monies were used for gambling and were wholly dissipated by 19 May 2000.  The plaintiff said that by this time his gambling had increased to “compulsive, uncontrollable levels” and was probably “close to pathological levels” so that he gambled uncontrollably despite making several attempts to seek help.

24. As I understood the plaintiff’s evidence, he continued in this state throughout the period when he and his wife were members of SLCU and after they became customers of Westpac on 17 April 2003.

25. The plaintiff also claimed that because of his depression, he began smoking cannabis.  The asserted commencement date of the plaintiff’s use of cannabis is not clear but I understand it to be after 10 August 1999, the date upon which the plaintiff first made cash withdrawals exceeding $2,000.  (On 10 August 1999 the plaintiff made four cash withdrawals of $450, $650, $1,300 and $1,000 respectively).

26. The plaintiff claims that during at least part of the period before the “transfer” of the loan to SLCU, ACCU was aware of his gambling problem.  His wife told an employee at the Noarlunga branch, Mr Joseph Walker, in about December 1999, that he was gambling and asked him (Mr Walker) to enforce ACCU’s withdrawal policies.  It will be necessary to make detailed findings about this matter later but, as previously indicated, the plaintiff’s suspected gambling problem was the reason why ACCU declined in January 2000 to increase the line of credit to $85,000.

27. The plaintiff submits that, apart from other considerations, ACCU’s knowledge of his gambling gave rise to a duty of care which was breached by it in not enforcing its withdrawal policies and in not removing the credit limit on their account, once the loan was transferred to SLCU.

28. In addition to the line of credit from ACCU (and later from SLCU and Westpac), the plaintiff borrowed money from other sources.  From time to time, he obtained unsecured personal loans from finance companies such as AGC, GE Capital Finance and AVCO, or made use of monies obtained through the use of store credit cards.  For the most part, these loans were for amounts such as $2,000, $3,000 or $5,000.  The monies obtained from these sources were also used for gambling.  When the plalintiff and his wife sought increases in the lines of credit obtained from ACCU, SLCU and Westpac, they would often describe the reason for seeking the increase as including “debt consolidation” and the increase, when granted, was often used in part to discharge the liabilities under these personal loans.  The plaintiff said that this pattern of obtaining finance repeated itself several times with the amounts obtained being used for gambling. 

29. After 19 May 2000, ACCU made demands to the plaintiff for the repayment of the $55,000.  Those demands included threats of legal action.  As it happens, ACCU has never instituted proceedings seeking recovery and, even in the present proceedings, has not brought a cross-claim against the plaintiffs.  The plaintiff does, however, complain of ACCU’s conduct in late 2003 in pursuing its claim.

30. On 30 October 2003, Mr Roger Kuchel, ACCU’s credit control manager, wrote to the plaintiffs pointing out that ACCU had not received any repayment on the outstanding account.  Mr Kuchel said:

    I advise that Australian Central is prepared to adopt a conciliatory approach but would expect that a repayment plan to clear the current outstanding debt could be negotiated to commence in November 2003.  Australian Central would also expect that, as part of this repayment plan, you would agree to offer a mortgage over your property that would be subsequent to any current mortgages over your property.  Please note that in the event of default, Australian Central reserves the right to apply interest at the variable rate at the time, in addition to the recovery of any enforcement expenses necessary to recover this debt.

    Mr Kuchel invited the plaintiffs to contact him personally to “formalise a resolution”.

31. The plaintiffs did not respond at all to that letter.  Mr Kuchel wrote again on 22 December 2003 requesting the plaintiffs to contact ACCU’s credit risk manager, Mr Greg Jones.  He continued:

    If you do not contact Mr Jones within 14 days from the date of this letter, Australian Central may have no option other than to institute legal proceedings to recover its debt.

    It is in your interest to negotiate a mutually acceptable resolution to this matter and thereby avoid legal proceedings and costs that will be payable by you in addition to the outstanding debt.

32. The plaintiff says that he regarded the implied threat of legal proceedings seriously.  In particular, he was concerned about the loss of their home.  These concerns were prominent in his mind when he realised that Westpac too had mistakenly given him and his wife access to more credit than that to which they were entitled.  The plaintiff claims that it was his psychological condition and compulsive gambling caused by ACCU’s conduct in the manner and amount of credit which it made available, and its conduct in making the demands, which accounts (along with Westpac’s own conduct) for his use of the credit which Westpac’s mistake made available.  As I understand it, by this means the plaintiff attributes to ACCU (as well as to Westpac) responsibility for his conduct in relation to the second line of credit from Westpac.

33. Finally, the plaintiff complains of ACCU’s conduct in reporting to a credit reporting agency, Baycorp Advantage, on 9 June 2004 that the amount overdue on the loan contract was $50,505 “due to a payment default”.  The plaintiff became aware of the report at the end of February 2005. He regarded the report to Baycorp Advantage as being in breach of an undertaking given to him by an ACCU employee to the effect that ACCU would not pursue its claim unless he and his wife came into money.  The plaintiff said that finding that he had been “blacklisted” caused him “great consternation … I panicked again and everything got accelerated and exacerbated again, because I thought I was a goner …”.  The plaintiff claims that ACCU’s reporting of him to Baycorp Advantage was a separate act of negligence and he claims damages in respect of the additional sickness which he says it has caused.  The cause of action concerning the report to Baycorp Advantage was added to the statement of claim on 11 April 2008.  I directed that the amendment was to take effect as and from 4 April 2008 (being the date that ACCU first had notice of this proposed plea).

1. The plaintiff’s amended statement of claim is discursive and does not plead appropriately the facts and the causes of action upon which he relies.  It alleges that ACCU’s conduct constituted “contractual negligence”.  ACCU treated the claim against it as having been made in both contract and negligence.  Neither the contractual term alleged to have been breached nor the common law duty of care was identified but the trial proceeded as though the plaintiff was alleging a breach of an implied term and of a common law duty that ACCU should exercise reasonable care not to cause him injury in the manner of its provision of credit, in particular, by failing to enforce its withdrawal policies, by failing to remove the credit limit on their account in February 2000, and by continuing thereafter to make credit available.

2. 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.

3. The indebtedness which is the subject of the plaintiff’s claim is in fact an indebtedness of the plaintiff and his wife.  Mrs Politarhis makes no corresponding claim. The plaintiff claims to be entitled to recover the whole of the indebtedness.  No point was taken by ACCU about this feature of the claim.

   Outline of the Plaintiff’s Claim Against Westpac

4. 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.

5. 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.

6. 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.

7. As previously noted, the plaintiff alleged “contractual negligence” by Westpac.  Again, it was not clear whether a breach of a contractual term was alleged.  I will treat it as involving claims similar to those made against ACCU.

8. The plaintiff also claims that Westpac’s conduct in 2006 in “regularising” the accounts was unconscionable.  The plaintiff did not make clear what relief he sought in the event that this claim was accepted, but I understand it to be part of his resistance to Westpac’s application for an order of possession.

9. Finally, although not pleaded, the plaintiff complained in the opening of his case that Westpac had frustrated his attempts to access his superannuation monies.  He had sought such access in order to pay at least some of the arrears on the original  line of credit of $180,000.  He claimed that Westpac had declined to provide a certificate required by his superannuation fund before making the superannuation monies available.  It is not clear how the plaintiff submitted that the conduct which he attributed to Westpac should be characterised, or what relief he seeks in respect of it.  I will treat it as though it is part of the plaintiff’s plea of unconscionable conduct by way of resistance to Westpac’s claim for possession of the house property.

   Assessment of the Plaintiff

10. The plaintiff impressed me as being reasonably intelligent and articulate.  I formed the impression that he 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.  One example is sufficient at this stage.  In this litigation, the plaintiff attributed his depression, paranoia, cannabis addiction and other psychological states to his gambling, and attributed that gambling in turn to the conduct of the defendants.  Those attributions contrast with statements made by the plaintiff in relation to an unrelated claim under an insurance policy in 2005.  I permitted the plaintiff to tender, over the objection of the defendants, a report of a psychiatrist, Dr Norman Rose, dated 25 July 2005, without Dr Rose having to attend to give oral evidence.  Dr Rose assessed the plaintiff on 20 July 2005 in relation to a claim for a total and permanent disablement benefit.  It is clear from Dr Rose’s report that in relation to that claim, the plaintiff attributed his psychological state and ill health to the neck injury which he had suffered in 1992 and not to any conduct by ACCU or by Westpac.  He told Dr Rose that:

    … his depression and anxiety … developed in relation to a neck injury and subsequent disputes with medical practitioners and WorkCover authorities following the neck injury in 1992.

11. Later, he told Dr Rose that he had experienced “significant distressing and severe psychiatric symptoms for 12 years”.  Dr Rose recorded that the plaintiff blamed the WorkCover insurer and his employer for making him sick and that he claimed that his depression, drug abuse and pathological gambling had commenced following the neck injury.  This history and these attributions contrast with the plaintiff’s claims in the present proceedings.

12. The plaintiff has a history of manipulating people and circumstances, including by telling untruths, in order to pursue his own interests.  ACCU tendered documents concerning the plaintiff’s service in the RAAF.  The plaintiff acknowledged that in relation to a number of applications during the course of that service, he had not told the truth, or at least the complete truth.  He admitted to manipulating his wife, including by lying to her and by threatening, or by appearing to attempt, suicide in order to gain her sympathy.  The plaintiff was assessed by Dr Jack White (psychologist), at his own request, and by Dr Alan Cotton (psychiatrist), at the request of ACCU in relation to his current claims.  Each of Drs White, Cotton and Rose remarked upon the plaintiff’s manipulative personality and style.  The plaintiff recognised his own manipulative qualities.  After describing the action which he took to dissuade his wife from informing Westpac at the end of February 2004 of their mistake, the plaintiff said:

    Your Honour, you have no idea how manipulative and convincing I can be.

13. On a number of occasions during his cross examination, I considered that the plaintiff deliberately avoided answering a question directly.  I also had the impression that the plaintiff sometimes embarked upon a discursive answer, so as to give himself the opportunity to consider the implications of the question and of his possible answer, before answering the question more directly.  That is, I am satisfied that there were occasions when the plaintiff was deliberately evasive.

14. Finally, I considered a number of aspects of the plaintiff’s evidence to be quite implausible.  Again, one example is sufficient for present purposes.  The plaintiff claimed that he did not know until reading the report of Dr Rose in July or August 2005 that doctors had diagnosed him with the psychiatric condition of depression.  I am unable to accept that claim.  The medical notes, case notes, and hospital records dating back to 1993 tendered in the trial are littered with references to the plaintiff’s depression and to the treatment of that condition.  In many instances, the medical and case notes record the plaintiff’s own complaint of depression.  The plaintiff has previously seen at least two psychiatrists (Dr Lukacs and Dr Gipslis) and, since at least 1995, has been prescribed a substantial amount of anti-depressant medication.  It is improbable that that medication was prescribed for him without him being given, at the same time, an appropriate explanation about its purpose.  I considered that this was one instance of the plaintiff seeking to adapt the evidence so as to promote his purposes in the present litigation. In these proceedings the plaintiff wished to attribute his depression to the impugned conduct of ACCU and Westpac, and also to rely on what he had learnt from a reading of the report of Dr Rose to support his application for an extension of time.

15. In making these assessments I am not overlooking the importance of this litigation to the plaintiff and his family.  The plaintiff recognises that he and his family face financial ruin, particularly if an order for possession of their property is made in favour of Westpac.  The plaintiff has told more than one  health professional that if he does not succeed in this litigation, he will suicide.  Some of the plaintiff’s conduct in the litigation is therefore understandable but it does not cause me to consider that the assessments made above are inappropriate.

16. 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.

    Assessment of Mrs Politarhis

17. I consider Mrs Politarhis generally to have been an honest witness.  That does not mean that I regarded her evidence as always reliable.

18. Mrs Politarhis is very loyal to her husband.  I referred earlier to the plaintiff’s domination of her.  That domination was revealed in the evidence of  both plaintiffs.  There were occasions in the course of her own evidence when Mrs Politarhis appeared to look to her husband for confirmation.  I consider that there were aspects of Mrs Politarhis’ recollection of events which had been influenced by her husband’s discussions with her.  In particular, I gained the impression that Mrs Politarhis’ view that ACCU and Westpac were responsible for the circumstances now facing the plaintiffs derived from discussions with her husband.  I also consider that in certain respects Mrs Politarhis had come, by reason of her husband’s persuasions, to attach a greater significance to some events than would otherwise have been the case.

19. But, as I have said, I did consider Mrs Politarhis’ evidence generally to have been honest.  Amongst other things, it gave an insight into the plaintiffs’ domestic life and into the difficulties which she and their children have experienced over a long period by reason of the plaintiff’s compulsive gambling and dominating personality.

    Determination of the Claim Against ACCU

    Liability of ACCU:  General Approach

20. ACCU submitted that the relationship between it and the plaintiffs was governed by contract.  It identified three contracts as being relevant:  the original contract concerning the plaintiffs’ membership of ACCU, and the two contracts relating to the provision of the line of credit into which the plaintiffs entered on 6 May 1999 and on 2 December 1999.

21. ACCU submitted that the legal principles governing a banker-customer relationship applied to its relationship with the plaintiffs.  This had the consequence, it was submitted, that their relationship was one of debtor and creditor and, further, that with the exception of obligations arising from implicit terms, such that it would not cease to do business with the plaintiffs except upon reasonable notice, it did not otherwise owe the plaintiffs a duty of care.  In relation to the incidents of the banker-customer relationship, ACCU referred to the well-known passage in the judgment of Atkin LJ in Joachimson v Swiss Bank Corporation:[2]

    The bank undertakes to receive money and to collect bills for its customer’s account.  The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them.  The promise to repay is to repay at the branch of the bank where the account is kept, and during banking hours.  It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch, and as such written orders may be outstanding in the ordinary course of business for two or three days, it is a term of the contract that the bank will not cease to do business with the customer except upon reasonable notice.  The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery.  I think it is necessarily a term of such contract that the bank is not liable to pay the customer the full amount of his balance until he demands payment from the bank at the branch at which the current account is kept.[3]

    [2] [1921] 3 KB 110.

    [3] Ibid at 127.

22. For the proposition that ordinarily a duty of care will not be imposed in a banker-customer relationship, ACCU referred to Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd;[4] Radin v Commonwealth Bank of Australia;[5] NMFM Property Pty Ltd v Citibank Ltd (No 10);[6] National Australia Bank Ltd v Nemur Varity Pty Ltd;[7] Lomsargis v National Mutual Life Association of Australasia Ltd[8] and Tomlin v Ford Credit Australia Ltd.[9]

    [4] [1986] 1 AC 80 at 107-108.

    [5] [1998] FCA 1361.

    [6] [2000] FCA 1558 at [803]; (2000) 186 ALR 442 at 608.

    [7] [2002] VSCA 18 at [45]-[46]; (2002) 4 VR 252 at 270-271.

    [8] [2005] QSC 199 at [52]-[59]; [2005] 2 Qd R 295 at 313-315.

    [9] [2005] NSWSC 540 at [123]-[132].

23. Because the plaintiffs were unrepresented, the appropriate legal characterisation of their relationship with ACCU was not canvassed in their submissions.  In those circumstances and because, in the view which I take of other aspects of the plaintiffs’ claims it is not necessary to do so, I am reluctant to express a concluded view about ACCU’s submission.  I do, however, express my opinion that ACCU’s submission about its relationship with the plaintiffs may require some qualification.  The plaintiffs were not only borrowers from, or lenders to, ACCU.  They were its members and each of ACCU and the plaintiffs had obligations towards the other arising from that membership.  The implications arising from the membership relationship were not explored in the submissions.  Further, it is not necessarily the case that the mistaken advance of credit to the plaintiffs between February and May 2000 was governed by the contract of 2 December 1999, as ACCU contended.  I accept, however, that on any view of the relationship between the parties, it was commercial in character.

24. In the circumstances outlined above, I propose to proceed on the basis most favourable to the plaintiffs, namely, that the relationship between ACCU and the plaintiffs was not such as to preclude altogether ACCU owing a duty of care to the plaintiffs going beyond the matters which were necessarily incidental to the express obligations arising under their contract.  The contractual relationships are nevertheless very relevant in determining whether ACCU did owe the duty of care alleged by the plaintiff.

    The Membership Relationship

25. By their application for membership on 25 October 2003, each of the plaintiffs agreed to be bound by the rules of ACCU.  They continued to be bound while they remained members, which was at least until 19 May 2000 when Mr Glenn spoke to Mr Kuchel. It is unclear whether the plaintiffs are still members.

26. The rules of ACCU govern its functioning as a financial co-operative and certain aspects of its relationship with its members.  They indicate that the objects of ACCU include the provision of financial accommodation for members, the encouragement of savings by members and the provision of programs and services to members to assist them to meet their financial, economic and social needs (clause 4.1).  Subject to some qualifications which are not presently relevant, ACCU may only lend money to, and accept deposits from, its own members (clause 4.3).  A person may become a member of ACCU only by, amongst other things, subscribing for a minimum number of shares (clause 4.10).  The rules provide for the circumstances in which a person’s membership may cease, one of which is expulsion on the ground that the member has engaged in conduct detrimental to ACCU (clause 7).  Subject to certain qualifications, any profits made by ACCU are to be distributed to its members in the form of a rebate in the interest rate applicable to their borrowings (clause 9).

27. The ACCU rules do not contain any provision dealing expressly with daily cash withdrawal limits, identification or documentary requirements for account withdrawals, or with lending practices relevant to this case. 

28. ACCU did not contend that a mutual obligation of good faith was implicit in the relationship between it and its members.

    The Loan Contracts

29. The plaintiffs were also bound by the terms of the loan contracts concerning the line of credit into which they entered on 6 May 1999 and 2 December 1999 respectively.  The terms of those loan contracts were relevantly identical.

30. Under the contract of 2 December 1999, ACCU agreed “… to make available credit to you up to the credit limit of [$55,000] …” and the plaintiffs agreed not to exceed that limit.  The plaintiffs agreed to pay interest and to make a monthly payment equivalent to the amount of interest which had been debited to the account in the previous month.  ACCU’s agreement to make credit available was subject to a condition that the plaintiffs provide a mortgage over their property at Reynella.  The loan contract did not specify any term during which the credit was to be available, but ACCU had the right to reduce the credit limit at any time. The contract also contained conventional provisions concerning default and enforcement.

31. ACCU submitted that the terms of the loan contract of 2 December 1999 also applied to the credit provided to the plaintiffs after February 2000, ie, after their indebtedness to ACCU had been discharged from the monies borrowed from SLCU.  There are some difficulties with that submission.  I am satisfied that it was the mutual contemplation of ACCU and of the plaintiffs that the loan contract of 2 December 1999 would come to an end on the discharge of the plaintiffs’ indebtedness under it and on the discharge of the mortgage granted to ACCU (both of which occurred on 24 February 2000).  It is arguable that the contract of 2 December 1999 had within it an implied term that on discharge of the mortgage securing the line of credit ACCU could (and should) remove the credit limit which was applicable to the plaintiffs’ account.  There are also difficulties in regarding the whole of the terms of the 2 December 1999 contract as applying, by implication, to the credit advanced after 24 February 2000.  Contrary to the terms of the written loan agreement, ACCU had not agreed to make the credit accessed by the plaintiff after February 2000 available at all.  It did so inadvertently. The condition concerning the grant of a mortgage could not be enforced.  It was undoubtedly a condition which existed for the benefit of ACCU, but there is an artificiality in treating the condition as having been impliedly waived by it.  Furthermore, the ACCU submission is inconsistent with its submission that the plaintiff acted dishonestly in accessing the credit between February and May 2000.

1. For these reasons I am not willing to conclude that the plaintiff’s withdrawals from the ACCU account after 24 February 2000 were governed by the contract of 2 December 1999, or by the terms contained in it.

2. Neither of the loan contracts of 6 May 1999 and 2 December 1999 contained any provision concerning daily cash withdrawal limits, or concerning the identification or documentary requirements for the making of withdrawals.

   The Common Law Duty of Care:  Mental Injury

3. The plaintiff’s claim that ACCU (and Westpac) owed a duty to exercise reasonable care to avoid causing, or exacerbating, his compulsive gambling, depression, paranoia and other psychological states invokes the common law principles concerning the negligent causation of mental harm. Those common law principles apply because (with the exception of the claim arising from the report to Baycorp Advantage) s 33 of the Civil Liability Act 1936 (SA), as amended by the Law Reform (Ipp Recommendations) Act 2004 (SA), came into operation on 6 May 2004, ie, after the time when the plaintiff alleges that he had sustained his mental injury as a result of the conduct of each of ACCU and Westpac.

4. The common law principles were addressed by the High Court in Tame v State of New South Wales; Annetts v Australian Stations Pty Ltd.[10]The decisions in Tame and Annetts indicate that one person may owe a duty to another to take reasonable care to avoid causing a recognised psychiatric illness, even though that illness does not result from a sudden shock.  Further, Tame and Annetts establish that it is not necessary for the plaintiff to establish that he was a person of “normal fortitude”.[11]  However, proof that the risk of the plaintiff sustaining a recognisable psychiatric illness was reasonably foreseeable is not, by itself, sufficient for the duty of care to exist.  Regard must be had in addition, in a case like the present, to the relationship between the plaintiff and the defendant, the existence of any vulnerability to psychiatric illness which the plaintiff may have, any knowledge by the defendant of that vulnerability and whether or not the particular plaintiff did suffer a sudden shock.  The plaintiff must establish that he or she has suffered a recognisable psychiatric illness.[12]  Emotional distress, such as grief or sorrow not amounting to a psychiatric illness, is insufficient.  Similarly, a psychological disorder not amounting to a mental illness is insufficient.

   [10] [2002] HCA 35; (2002) 211 CLR 317.

   [11] Ibid at [16], [61]-[62], [201]; 332-333, 343-344, 385.

   [12] Ibid at [7]; 330.  See also Koehler v Cerebos (Australia) Ltd [2005] HCA 15 at [33]; (2005) 222 CLR 44 at 58.

5. In the present case, the plaintiff’s principal claim is that he has sustained the conditions of pathological gambling, depression, cannabis addiction and other effects on his psychological health, including paranoia, insomnia, apathy, loss of appetite and loss of libido.  Although this was the plaintiff’s principal position, at times he submitted (in effect) in the alternative that these were existing conditions which had been exacerbated by the conduct of ACCU and Westpac.

6. The question of whether pathological gambling amounts to a recognised psychiatric illness was an issue in the trial.  I heard oral evidence from only two mental health specialists: Dr White, the psychologist, and Dr Cotton, the psychiatrist.  Neither gave any detailed evidence about the nature of pathological gambling and there was no evidence of a neuro-scientific nature.

7. Dr White, who assessed the plaintiff in February 2008 for the purposes of this litigation, considered that the plaintiff had significant mental health problems.  In particular, Dr White considered that the plaintiff was likely to satisfy the diagnostic criteria for five different disorders listed in the Diagnostic and Statistical Manual of Mental Disorders (4^th Ed) (DSM-IV) published by the American Psychiatric Association, namely, pathological gambler, cannabis dependence, adjustment disorder with mixed anxiety and depressed mood, borderline personality disorder, and anti-social personality disorder. Dr White described pathological gambling as “an uncontrolled desire to gamble”, involving a willingness to go to extreme lengths, including by engaging in criminal activity, to obtain the money with which to gamble. Dr White considered the borderline personality disorder and antisocial personality disorder characteristics to be dominant in the plaintiff’s overall presentation, and that his behaviour was driven primarily by his underlying personality traits. In coming to his conclusions, Dr White relied very much upon his analysis of various personality and other psychological inventories administered to the plaintiff by a student who was assisting him at the time of his assessment.  It is pertinent to note that the same (or similar) inventories had been administered to the plaintiff by another psychologist, Mr Quinton, only a month or so prior to his assessment by Dr White.  Mr Quinton was not called to give evidence and I declined to permit the plaintiff to tender his report.

8. Dr Cotton examined the plaintiff in early April 2008 at the request of ACCU.  He did not consider that the plaintiff suffered from a mental or psychiatric illness.  Instead, he considered that the plaintiff suffered from a personality disorder.  Dr Cotton said:

   … although at times he has suffered from significant symptoms of depression, anxiety, paranoia and suicidal ideation, in my view the major diagnosis appropriate for the last 10 years or so is that he has a personality disorder with a range of obsessional, anti-social, narcissistic and borderline traits, exacerbated by the increased marijuana smoking and further characterised by the behavioural manifestations of compulsive, pathological gambling.

9. Dr Cotton described the plaintiff’s personality in the following terms:

   In my view, he shows a lifelong history of an obsessional personality with the desire for structure, order and control with conscientious and perfectionist traits and a propensity to become agitated when his routines are interrupted, as was the case at the time of his neck injury, when he developed features of a paranoid personality, his obsessional personality also expressing itself with his lifelong preoccupation of betting on horses.

   Since May 1999, in my view, he has demonstrated symptoms of a more widespread personality disorder with anti-social, narcissistic and borderline characteristics leading to impulsive emotionally labile, manipulative, at times grandiose and anti-social behaviour, these aspects of his personality disorders being expressed by the increasingly irresponsible, compulsive nature of his gambling behaviours.

10. 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.

11. As indicated earlier, I permitted the plaintiff to tender a report of Dr Rose, psychiatrist, dated 25 July 2005 without Dr Rose having to attend to give oral evidence.  Dr Rose considered it likely that the plaintiff had an underlying personality disorder but also that he was suffering from a paranoid disorder and a dysthymic disorder (both being psychiatric diagnoses).  Dr Cotton said that a dysthymic disorder is an emotional state of persistent apathy, lethargy, despondency, negative thinking, lack of interest and lack of energy, which is of less severity than a major depressive disorder.

12. When allowing the plaintiff to tender Dr Rose’s report, I warned him that less weight may be attached to Dr Rose’s opinions because they had not been the subject of cross-examination. The plaintiff faces a further difficulty in his reliance on the opinion of Dr Rose.  As Dr Rose was given a different history from that given in this Court there is no evidence linking his diagnoses to the plaintiff’s gambling or to the impugned conduct of ACCU and Westpac. In these circumstances, I am not prepared to prefer the opinion of Dr Rose over that of either Dr White or Dr Cotton.

13. In relation to Dr White’s reliance on DSM-IV, Dr Cotton made the point that satisfaction of the diagnostic criteria for a particular condition listed in that Manual does not necessarily indicate that the person suffers from a mental illness.  In particular, in relation to the condition of pathological gambling, Dr Cotton referred to the cautionary statement contained in DSM-IV:

    The purpose of DSM-IV is to provide clear descriptions of diagnostic categories in order to enable clinicians and investigators to diagnose, communicate about, study and treat people with various mental disorders.  It is to be understood that inclusion here, for clinical and research purposes, of a diagnostic category such as Pathological Gambling or Paedophilia does not imply that the condition meets legal or other non-medical criteria for what constitutes mental disease, mental disorder, or mental disability.  The clinical and scientific considerations involved in categorisation of these conditions as mental disorders may not be wholly relevant to legal judgments, for example, that take into account such issues as individual responsibility, disability determination and competency.

14. I had some reservations about some of Dr Cotton’s evidence and analysis.  I had the impression that some of his evidence may have reflected his own adverse view of the underlying merits of the plaintiff’s claims.  Nevertheless, I prefer Dr Cotton’s evidence generally to that of Dr White.  In particular, to the extent that Dr White did consider the plaintiff to suffer from mental illness, I am not satisfied that the personality and psychological inventories upon which he relied provide a sound basis for such a diagnosis.  Furthermore, I consider that there is merit in Dr Cotton’s observation that these inventories do not always provide reliable results when administered in a forensic context such as the present.  An alert subject, such as the present plaintiff, would be capable in my opinion of distorting or falsifying the responses to the inventories used by Dr White so as to make analyses based upon those responses unreliable. That is particularly so of subjects, who, like the present plaintiff, were responding to the inventories for a second time within the space of a very short period.

15. 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.

    The Common Law Duty of Care:  Economic Loss

16. The financial loss which the plaintiff claims ACCU was under a duty to take reasonable care to avoid is the indebtedness to which he and his wife are now subject by reason of his borrowing monies for gambling purposes.  Hence, he claims from ACCU the sum of $180,000 which is their liability to Westpac under the “old” account, the sum of $154,000 which, in round terms, was the balance of the “new” account when he reported his activities to Westpac on 29 March 2004, and the sum of $120,000 which is the aggregate of monies said to have been borrowed from other sources and used for gambling.  The plaintiff does not seek any order concerning the sum of approximately $50,000 which he borrowed from ACCU in the period between February and May 2000, presumably because ACCU has not instituted a claim seeking the repayment of those monies.

17. There are a number of practical and evidential issues concerning the plaintiff’s claims: not all of the borrowings from ACCU, SLCU and Westpac were used for gambling; some of the monies borrowed from Westpac were, in effect, used in discharging liabilities incurred earlier than 1999 and before the conduct of ACCU which is impugned; the plaintiff provided scarcely any evidence concerning the claim for $120,000; and there are obvious issues arising as to the causation of the plaintiff’s indebtedness, but these difficulties can be put to one side for the moment.  What is presently relevant is that the financial losses which the plaintiff alleges take the form of an indebtedness.

18. Insofar as the plaintiff’s claim that ACCU’s negligence caused these financial losses is independent of the claim that its negligence caused his compulsive gambling and other psychological conditions, it invokes the common law principles concerning the circumstances in which a duty of care to avoid causing financial loss to another may arise.  Those principles were considered by the High Court in Perre v Apand Pty Ltd. [13]

    [13] [1999] HCA 36; (1999) 198 CLR 180.

19. It is not sufficient (as the plaintiff’s submissions supposed) to establish the existence of a duty of care by ACCU to avoid causing him economic loss to show that loss of the general kind alleged was reasonably foreseeable.[14]  It may be accepted that there are persons in the community who are subject to addiction of one form or another or who may, on exposure to certain conditions, be prone to such addictions.  It may be reasonably foreseeable that at least some of these persons will seek to borrow monies from a financial institution, and that at least some will spend the borrowed monies in developing or satisfying their addiction.  Put more shortly, it is reasonably foreseeable that some members of the community will incur financial indebtedness in satisfying an addiction. No doubt these are matters which financial institutions, acting reasonably, can and do foresee.  But it does not follow that this foreseeability, by itself, gives rise to a duty of care recognised by the law owed by financial institutions to avoid providing credit to such persons, or to avoid allowing them to accumulate an indebtedness.[15]

    [14] Ibid.

    [15]   Sullivan v Moody [2001] HCA 59 at [42]; (2001) 207 CLR 562 at 576.

20. Courts have found it difficult to articulate with precision the circumstances in which a duty to avoid the negligent infliction of economic loss will arise.  Generally, however, such a duty has been found to exist when courts have been satisfied that, in the particular circumstances of the relationship between the defendant and the plaintiff, the former should have had the interests of the latter in contemplation before pursuing or failing to pursue the course of action in question.[16] These circumstances may include (in addition to foreseeability of risk of loss) the ability, or lack of ability, of the plaintiff to protect himself or herself from negligence by the defendant; any reliance by the plaintiff on the defendant taking action to protect his or her interests; the control, or absence of it, exercised by the defendant; whether or not the parties stand in a contractual relationship by which the plaintiff may protect himself or herself from negligent conduct by the defendant; and the extent to which the imposition of the duty of care will impact upon the autonomy of action of both the plaintiff and the defendant.

    [16]   Perre v Apand Pty Ltd [1999] HCA 36 at [100]; (1999) 198 CLR 180 at 219 per McHugh J.

21. The principles derived from Perre v Apand in the context of a duty of care said to be owed to a gambler were considered in Reynolds v Katoomba RSL All Services Club Ltd.[17]The New South Wales Full Court considered whether a duty of care was owed by a club, whose activities included the operation of poker machines, to a member who was a “problem” gambler.  All members of the Court held that the club owed no duty to the member to advise him to resign his membership (without which he could not have obtained access to the club’s poker machines), to warn him of the imprudence of gambling, or to refrain from cashing cheques by which he obtained cash used in his gambling.  Spigelman CJ held that, save in an extraordinary case, economic loss occasioned by gambling should not be accepted as a form of loss for which courts permit recovery.[18]  He considered that the loss of money through gambling was a risk caused entirely by the plaintiff’s own conduct and was not an interest which the law ought to protect.[19]  Because of the law’s respect for the autonomy of individuals, and its object of interfering with such autonomy only to the extent necessary for the maintenance of society, Spigelman CJ considered that it was not reasonable to impose on the club a duty to interfere with the plaintiff’s freedom to spend his money as he chose.  In particular, it was not reasonable to impose on the club a duty to take reasonable care to protect the plaintiff from self-inflicted economic loss.[20]  Even though the club had knowledge of the plaintiff’s problem gambling, he was not so vulnerable that he lacked the ability to protect himself.[21]

    [17] [2001] NSWCA 234; (2001) 53 NSWLR 43.

    [18] Ibid at [9]; 45.

    [19] Ibid at [15], [17]; 46.

    [20] Ibid at [20]-[27]; 47-48.

    [21] Ibid at [30]-[53]; 49-53.

22. Powell JA considered that the plaintiff was not vulnerable to negligent conduct by the club[22] and that the club’s freedom to pursue its legitimate interests should not be compromised by the imposition of the duty of care alleged.  Giles JA took a similar view, saying:

    Where a plaintiff wishes to conduct himself in a particular way, even one involving possible harm, the importance attached to individual autonomy restrains imposition of a duty of care requiring that he be prevented or hindered from so conducting himself ….  Vulnerability connotes that the plaintiff is unable to look after his own interests and is open to the control of the defendant …[23]

    [22] Ibid at [127]; 82.

    [23] Ibid at [141]; 85.

23. I have found the judgments in Reynolds to be of considerable assistance in considering the issues relating to the duty of care alleged by the plaintiff.

24. I now turn to address the individual claims made by the plaintiff.

    The Claim of a Daily Withdrawal Limit

25. The plaintiff claims that ACCU had a policy that a member could not withdraw more than $2,000 in cash per day without 24 hours prior notice.  He claims that ACCU failed to enforce this policy in 1999 and 2000 with the effect that he was able to obtain access to cash from the line of credit so as to gamble using large amounts of money in very short periods.  He claims that ACCU’s failure to enforce its own policy was negligent and a material cause of the financial losses, and of the damage to his mental health in 1999 and 2000.

26. There were a number of occasions in the period from July 1999 to May 2000 in which the plaintiff did withdraw more than $2,000 in cash in the one day.  On 10 August 1999 he made four withdrawals totalling $3,400 from the ACCU account ($450, $650, $1,300 and $1,000).  On 14 September 1999 he made three cash withdrawals totalling $3,100 ($600, $1,000 and $1,500).  On the next day, he made cash withdrawals totalling $6,500 (three of $2,000 and a withdrawal from an ATM of $500).  On 11 October 1999 he made two cash withdrawals totalling $4,000 (one of $3,000 and one from an ATM of $1,000).  On 14 December 1999 he made four cash withdrawals totalling $3,400 ($600, $1,000, $300 and $1,500).  On 23 December 1999 he made three cash withdrawals totalling $5,000 ($1,000, $2,000 and $2,000).  The ACCU account statement also shows three cash withdrawals of $350, $1,000 and $1,000 respectively on 25 December 1999 but as that was Christmas Day, it may be that the statement reflects transactions which occurred on the previous day.  As the account was then close to the credit limit of $55,000, withdrawals of more than $2,000 ceased.

1. The effect of s 48(3) is that a court may not exercise the power to extend a limitation period prescribed by the LAA itself unless it is satisfied that the plaintiff has ascertained some facts material to his or her case within the period of twelve months immediately before the commencement of proceedings or that the plaintiff’s failure to institute proceedings within time resulted from some representations or conduct of the defendant. Even if satisfied of one or other of those matters, the court must still be satisfied that it is just to grant the extension of time.

2. The plaintiff did not contend that his failure to institute the proceedings within the period of three years resulted from any representations or conduct of ACCU or Westpac. He did, however, plead that he had learnt some facts which were material to his case and so sought to bring himself within s 48(3)(b)(i).

3. Subsections (3a) and (3b) were introduced into s 48 by s 76 of the Ipp Recommendations Act.  These new subsections limited the facts which could be regarded as material facts and specified particular matters to which a court should have regard in considering whether it is just to grant an extension of time.

4. Mr Blue QC, who appeared for ACCU, submitted that s 48 of the LAA, as amended by the Ipp Recommendations Act, applied to all of the plaintiff’s claims, including those causes of action which had accrued before its commencement on 6 May 2004. This submission faces the difficulty that Clause 1 of Schedule 1 of the Ipp Recommendations Act specifies that the amendments made by it are intended to apply only prospectively. Because I am satisfied that the plaintiff’s claims for an extension of time fail in any event, it is not necessary, for present purposes, to consider Mr Blue’s attempt to overcome the apparent ordinary meaning of Clause 1 of Schedule 1.

5. The plaintiff contended that facts which he had learnt on reading the report of Dr Rose in July 2005 and of Dr White in February or March 2008 amounted to an ascertainment of material facts for the purposes of s 48(3)(b)(i). He claimed that it was on reading Dr Rose’s report that he first learnt of the diagnoses of paranoid disorder, dysthymic disorder, cannabis addiction, and pathological gambling. As was pointed out to the plaintiff several times during the course of the proceedings, even if the matters which he learnt from reading Dr Rose’s report did amount to an ascertainment by him for the first time of material facts, that ascertainment occurred approximately 20 months before he commenced the proceedings. It was not, therefore, an ascertainment of facts within the period of twelve months before the commencement of proceedings as is required by s 48(3)(b)(i).

6. Dr White’s report is dated 29 February 2008 and, as I understand it, was received and read by the plaintiff on or about that same date. Whatever the plaintiff learnt on reading that report, it does not assist him in relation to his principal claims against ACCU and in relation to his claim against Westpac. The material facts which will enliven the discretion under s 48(1) must be ascertained before the commencement of proceedings and not after.

7. This means that I am satisfied that the plaintiff has not established the threshold matter required by s 48(3)(b)(i) before the discretion to grant an extension of time under s 48(1) in relation to his principal claims against either ACCU or Westpac is enlivened.

8. Different considerations apply to the application for an extension of time in which to commence the action against ACCU in respect of the Baycorp Advantage report.  Subsections (3a) and (3b) are applicable to this part of the application as the Baycorp Advantage cause of action did not accrue until after they had come into operation.

9. The effect of subsections (3a) and (3b) is that matters which the plaintiff learnt from reading Dr White’s report on or about 29 February 2008 may amount to an ascertainment of material facts within the meaning of s 48(3)(b)(i) of the LAA only if they formed an “essential element of [his] cause of action” or if they would have “major significance on the assessment of [his] loss”. The plaintiff cannot satisfy the first of these requirements: Dr White’s report did not even mention the Baycorp Advantage report, let alone the plaintiff’s reaction on reading it. Nor, given my conclusions about Dr White’s opinion, can it be said that his report “would” have major significance on the assessment of the plaintiff’s loss.

10. Even if I am wrong about that, I am not satisfied that it would be just to grant the plaintiff an extension of time in which to commence his claim with respect to ACCU’s report to Baycorp Advantage.  As indicated earlier, I am satisfied that this claim fails in any event, meaning that there is no point to an extension of time.  Further, I am satisfied that the plaintiff brought this claim solely because of his (mistaken) belief that it would enable him to overcome the time limitation difficulties which he faced in his principal claims. This makes it unnecessary to consider ACCU’s claim that an extension of time would cause it relevant prejudice, but I indicate that I am satisfied that some potentially important witnesses as well as documentary evidence are no longer available to ACCU.

11. This means that I am satisfied that the whole of the plaintiff’s claim against ACCU is statute barred and that his claim against Westpac, to the extent that it had accrued before 1 March 2004, is also statute barred.

12. These are further reasons why the plaintiff’s claim against ACCU and at least part of the claim against Westpac fail.

    Westpac’s Application for an Order for Possession

13. By its cross-action, Westpac seeks an order that the plaintiffs give up possession of their home at Reynella so as to enable it to be sold for the purpose of recovering the monies secured by the mortgage on it.

14. Section 132 of the Real Property Act 1886 (SA) (RPA) permits a mortgagee, when a default in payment has continued for at least one month, to give the mortgagor a written notice requiring payment of the monies then due and owing and warning that a sale of the mortgaged property may be effected if the default in payment continues. Section 133 of the RPA authorises the mortgagee to sell the mortgaged property if the default continues for at least one further month.

15. The exercise of the powers vested in a mortgagee by s 132 and s 133 of the RPA is qualified by s 55A of the Law of Property Act 1936 (SA) (LPA). The qualification applies when the mortgagor is a natural person and when the land is appropriated for domestic or agricultural use.[39]  Accordingly, s 55A applies in the circumstances of the present case.  Subsections (1) and (3) are presently relevant:

    [39]   LPA s 55A(5).

    55A—Enforcement of rights against mortgagor

    (1)     A right of sale or foreclosure in respect of mortgaged land, a right to enter into possession of mortgaged land or a right to appoint a receiver in respect of mortgaged land shall not be enforceable by the mortgagee under a mortgage to which this section applies against the mortgagor by action or otherwise unless—

    (a)the mortgagee has served upon the mortgagor a notice in writing—

    (i)alleging a breach of a covenant or condition of the mortgage by the mortgagor; and

    (ii)if the breach is capable of remedy, requiring the mortgagor within one month after service of the notice, or such longer period as may be stipulated in the notice, to remedy the breach; and

    (iii)if the mortgagee seeks compensation for the breach, requiring the mortgagor within one month after service of the notice or such longer period as may be stipulated in the notice, to pay to the mortgagee the amount of the cost and expenses, stipulated in the notice, that the mortgagee has reasonably incurred in consequence of the breach; and

    (b)where requirements are made of the mortgagor in the notice, he has failed to comply with those requirements.

    …

    (3)     In any proceedings brought by a mortgagee for the recovery of a mortgage debt or for the enforcement of a mortgage, or in proceedings instituted by a mortgagor within twenty-one days after service of a notice under this section, a court may, upon such fair and equitable terms as it may determine, grant relief to a mortgagor against the enforcement of rights of a kind referred to in subsection (1) of this section, and may reinstate the position of the mortgagor in all respects as if no breach of a covenant or condition of the mortgage had occurred.

    The effect of subsection (1) is that a mortgagee may not enforce rights of sale or foreclosure, or a right to possession, or a right to appoint a receiver in respect of mortgaged land unless it has first served upon the mortgagor a written notice containing specified information and has then allowed the mortgagor at least one month within which to comply with the requirements of the notice.  Under subsection (3), a court hearing and determining an application brought by a mortgagee for the enforcement of the rights specified in subsection (1) may, upon such fair and equitable terms as it considers appropriate, grant relief to the mortgagor against the enforcement of those rights.

16. By the memorandum of mortgage granted to Westpac on 8 April 2003, the plaintiffs mortgaged their interest in the property at Reynella in accordance with Westpac’s standard terms and conditions of mortgage.  The plaintiffs agreed to pay Westpac all monies owed by them to Westpac, “now or in the future”, alone or with others.  The mortgage was expressed to secure all amounts which the plaintiffs, or either of them, were liable to pay under the “secured arrangements”.  A “secured arrangement” was defined to mean “any document, agreement or arrangement, now or in the future”, whether or not contemplated when the mortgage was first granted, to which the plaintiffs, or either of them, and Westpac were parties and under which obligations arose from either of the plaintiffs to Westpac.

17. On 26 October 2006, Westpac served a document entitled “Notice of Breach and Intent to Exercise Power of Sale” on the plaintiffs by leaving the Notice at the Reynella property.  The Notice asserted that the plaintiffs were in default of their obligations under the credit contract entered into on 9 December 2003 because they had not paid monies payable under that contract to Westpac.  The Notice alleged that the default amounted to a breach of a condition of the mortgage.  The plaintiffs were required to remedy the default within 31 days.

18. The Notice told the plaintiffs that they could remedy the default and breach of mortgage by, within 31 days after the day on which the Notice was served, paying the sum of $12,431.12 which was “due and owing” to Westpac under the credit contract on Account No 99-2925 (the new account).  Payment of this amount would have reduced the debit balance in Account No 99-2925 from $210,431.12 to $198,000.

19. The Notice stated that the following would occur if the plaintiffs did not remedy their default:

    What will happen if you do not remedy your default under your credit contract and your breach of mortgage

    6.If you do not do what clause 5 of this notice requires:

    6.1     Westpac will accelerate your payments under your credit contract, which means that:

    6.1.1Westpac will no longer allow you to make regular repayments under your credit contract; and

    6.1.2Westpac will require you to repay all of the money that is outstanding under your credit contract immediately; and

    6.2     Westpac will begin enforcement proceedings against you, which may include:

    6.2.1taking action to enforce your mortgage; and

    6.2.2bringing proceedings against you in a court to recover all of the money that is outstanding under your credit contract and your mortgage; and

    6.3 Westpac will exercise the power of sale that is given to it as the mortgagee of your property under your mortgage, the Real Property Act 1886, and the Law of Property Act 1936, which means that your property will be sold by Westpac.

    7.The amount that you will have to repay immediately under your credit contract if Westpac exercises the right which is referred to in subclause 6.1 of this notice is the sum of $210,431.12 as at 24 October 2006, and interest at the rate of $42.58 per day after that date.

20. On or about 11 December 2006, Westpac sent, by separate pre-paid post to each of the plaintiffs, a document entitled “Notice of Demand”.  This second Notice repeated the assertions of default and breach of mortgage conditions contained in the first Notice.  It demanded immediate payment of the sum of $212,857.68 (being the balance on Account No 99-2925 in addition to interest).  The second Notice told the plaintiffs that if that sum and the accruing interest were not paid by 5.00 pm on 18 December 2006, Westpac would “exercise and enforce its rights and powers under your mortgage to recover the debt”.

21. By reason of their inadequate response to a notice to admit facts,[40] the plaintiffs are deemed to have admitted that they had received the first Notice on or about 26 October 2006 and the second Notice by no later than 18 December 2006.  However, quite apart from that deemed admission, the plaintiff admitted in cross-examination that he had seen each of the two Notices.  The plaintiffs have not made any payment to Westpac following their receipt of these Notices.

    [40]   Delivered under r 156 of the Supreme Court Civil Rules 2006.

22. It will be necessary to address shortly the plaintiff’s complaint about Westpac’s conduct in regularising the two accounts and in relation to use of his superannuation monies.  For the moment I will proceed on the basis that as at 24 October 2006 the balance on Account No 99-2925 properly stood at $210,431.12.  On that basis, I am satisfied that on 24 October 2006 the plaintiff was liable to pay to Westpac that amount.  I have referred to the liability of the plaintiff only because it is arguable that Mrs Politarhis, by reason of her ignorance until 23 February 2004 of her husband’s use of the new Westpac account, was not liable to Westpac for the full amount of $210,431.12.  However, as noted earlier, the mortgage secured the obligations of both plaintiffs, or either of them, to Westpac and it is entitled to rely on the plaintiff’s indebtedness only.

23. I am also satisfied that the liability of the plaintiff arose from a “secured arrangement” within the meaning of Westpac’s standard terms and conditions of mortgage.  An alternative analysis could regard Westpac as making a restitutionary claim for monies had and received by the plaintiff in consequence of its mistake.[41]  The plaintiffs did not contend for such an analysis and, in any event, I consider it to be inappropriate.  The monies advanced by Westpac did not lose their character as monies advanced under the line of credit of $198,000 simply because Westpac did not enforce the mutual intention (reflected in the authority given to it by the plaintiffs) to apply the monies first in discharging the plaintiffs’ indebtedness under the first loan.  Westpac’s mistake was not in the advance of monies under the line of credit of $198,000.  It was always contemplated that it would do so.  Its mistake related to the manner of the disbursement of the monies advanced.  Instead of $180,000 of the $198,000 being used to discharge the old loan, it was made available to the plaintiff to use at his discretion.  But, as I have said, I do not regard that mistake as altering the character of the monies as having been advanced under the loan contract.

    [41]   Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 376.

24. I am satisfied that the Notice of Breach and Intent to Exercise Power of Sale is a Notice which complies with s 55A(1) of the LPA.[42]  The service of two separate Notices is not required by s 55A,[43] nor by s 133 of the RPA.  In the present case, the second Notice warned the plaintiffs that Westpac did intend to exercise its rights and powers under the mortgage to recover the monies owing to it.

    [42]   Lamshed v Plakakis (1988) 47 SASR 316.

    [43]   Kirkman v Frost (1978) 20 SASR 192.

25. It follows from these conclusions that, apart from issues arising from Westpac’s regularisation of the accounts and concerning the application of s 55A(3), Westpac has made good its application for an order for possession.  I turn now to consider these two matters.

    Westpac’s “Regularisation” of the Accounts

26. When the plaintiff alerted Westpac to its mistake on 29 March 2004, the balance of the old account (No 75-7497) was $179,999.78, and the balance of the new account (No 99-2925) was $153,520.81.  Westpac then froze both accounts and, as I understand it, apart from interest there were no further debits to either account.

27. Some communications and negotiation occurred between Westpac and the plaintiffs in the period between 29 March 2004 and January 2006, but the detail of those communications was not disclosed in the evidence.  It is apparent that some of the discussions and negotiations in March 2005 involved Mr N. Rochow of counsel who was retained by the solicitors D’Angelo Kavanagh on behalf of Mrs Politarhis.  On 24 January 2006, Finalysons, on behalf of Westpac, wrote to D’Angelo Kavanagh.  The letter noted that the balances of the two accounts were as follows:

    Old account:               $204,169.36 as at 11 January 2006

    New account:             $177,003.97 as at 24 January 2006

    The letter then proposed a “regularisation of the accounts”:

    In order to regularise the position with the accounts and to give effect to the mutual intention of the parties referred to above, our client intends to adjust the balances of the accounts as follows:

    §   A debit entry will be made to the new account to bring the debit balance of that account up to the limit of $198,000; and

    §   A corresponding credit entry will be made to the old account.

    These adjustments are intended to reflect what the current balance of the new account would be if the debit balance of the old account as at 11 December 2003, amounting to $179,996.79, had been transferred to the new account on that date, and drawings up to the approved limit of $198,000 had subsequently been made on that account.

    If your client objects to this proposal, please let us know immediately.  If we do not hear from you within seven days from the date of this letter, we will assume that your client has no objection.

28. A copy of the letter of 24 January 2006 was sent on the same date to Mr Rochow. On 27 January 2006, D’Angelo Kavanagh responded to Finlaysons saying that they had sent a copy of the letter to Mrs Politarhis and had asked her to make an urgent appointment to see them.

29. A letter in substantially similar terms to that of 24 January 2006 was sent directly to the plaintiff on 2 February 2006.  Although the letter was addressed to the plaintiff at number 6 (and not number 4) Roxy Court, Reynella, the plaintiff acknowledged seeing it.

30. On 7 February 2006, Mr Rochow told Mr Jarvis at Finlaysons that by reason of his absence from his chambers, he had not had the opportunity to consider the letter of 24 January 2006 and was unsure when he would have time to see Mrs Politarhis (who was unwilling to make a decision without obtaining his view).  On 16 February 2006, not having heard further, Mr Jarvis sent by facsimile a letter to D’Angelo Kavanagh informing it that Westpac would proceed in accordance with its letter of 24 January 2006 “unless we hear from you prior to the close of business tomorrow”.

31. Neither Mr Rochow, nor D’Angelo Kavanagh, nor either of the plaintiffs contacted Westpac or Finlaysons thereafter to raise any objection to the “regularisation” of the accounts which Westpac proposed.  On 27 February 2006, Finlaysons recommended that Westpac proceed with the proposed regularisation.  This occurred on 8 March 2006.  An amount of $19,947 was debited to the new account bringing its balance to $197,999.64.  The same amount was credited to the old account reducing its balance to $188,469.85.  Finlaysons wrote to the plaintiff on 8 March 2006 to advise him of the regularisation.  On 9 March 2006, the plaintiff spoke by telephone with Mr Jarvis but did not raise any objection to the regularisation.

1. Westpac did not derive any interest rate advantage by the regularisation, as the interest rates applicable to both accounts were the same.  Nor did the regularisation alter the overall indebtedness of the plaintiffs to Westpac.

2. The above findings are largely drawn from documents tendered by both the plaintiff and by Westpac.  Westpac also called Mr Jarvis to give evidence about the communications preceding the regularisation.  I regarded the evidence of Mr Jarvis as reliable.  In particular, despite the evidence from the plaintiff that both he and his wife had objected to the regularisation before 8 March 2006, I prefer, and accept, the evidence of Mr Jarvis that no such objection had been communicated.

3. Westpac submitted that it was entitled to regularise the accounts because of the authority granted by the plaintiffs to it in the loan contract of 9 December 2003 concerning the disbursement of the monies in the new account.  The loan contract provided:

   TO WHOM WILL THE AMOUNT OF YOUR LOAN BE PAID?

   You authorise the Lender to disburse (pay out) your loan in accordance with instructions received from you or your solicitor / agent / conveyancer.

   The rest of this section confirms your current instructions as to how and to whom the Lender should disburse your loan proceeds.  These instructions will apply unless you or your solicitor / agent / conveyancer tell us otherwise.

   You’ll need to instruct the Lender, if you haven’t already, how to pay the following amounts.  If you don’t instruct the Lender, these amounts will be deducted from your loan proceeds.

   ...

   §   All amounts you still owe in relation to account number(s) 037134757497.

   §   The following amounts payable to:

   Stamping Charges Account:                 $63.00

   Westpac said that in transferring the sum of $19,947 on 8 March 2004, it was complying, to the extent that it was still possible, with that authority.  It submitted further that the authority was irrevocable, because it was intended to benefit both parties: the plaintiffs by eliminating their liability under the old contract; and Westpac by limiting the amount of credit which it had to provide. Westpac also relied on the absence of any objection to the regularisation.

4. By the time Westpac carried out the regularisation, a substantial amount of the line of credit had been drawn down and disbursed directly to the plaintiff.  It was no longer possible for Westpac to “pay out” the first loan, or to apply $180,000 from the line of credit to discharge “all amounts you still owe in relation to [a/c no 757-497]” as contemplated by the plaintiffs’ authority.  It could do so only to the extent of the credit which remained available under the $198,000 line of credit.

5. This raises the question of whether the plaintiffs’ authority to Westpac in relation to the application of the $198,000 line of credit is to be construed as operating only if a complete “pay out” was possible.  I do not consider that the plaintiffs’ authority is to be construed in that way.  Instead, it should be construed as authorising Westpac to disburse the monies to the old account to the extent possible to discharge the indebtedness under the old account, and not as an authority to apply that sum, and only that sum, necessary to discharge the indebtedness.  The latter construction would not be reasonable.  Although the parties contemplated that Westpac would transfer an amount sufficient to discharge the whole of the indebtedness under the old account, it is not to be supposed that they contemplated that Westpac could not do so if the amount available to be transferred was not sufficient to discharge the whole of the indebtedness.  Westpac’s mistake might have been ascertained at a very early stage, say, when the drawing down on the new account amounted to $20,000, leaving $178,000 of credit available.  It is difficult to contemplate that the parties intended the authority to be construed so strictly that in that circumstance Westpac could not have transferred the $178,000 so as to reduce the balance in the old account to $2,000.

6. I am satisfied that Westpac’s regularisation was authorised.

7. I am also satisfied that Westpac’s regularisation of the accounts should not be regarded as unconscionable.  Westpac did not take advantage of some condition or circumstance by which the plaintiffs were in a position of special disadvantage.[44]  The plaintiffs were not in such a position of disadvantage.  As noted earlier, Mrs Politarhis had sought legal advice.  Neither her solicitor nor her counsel raised any objection to the regularisation.  Although the evidence did not address this point specifically, I consider it quite improbable that the plaintiff was unaware of the legal advice given to Mrs Politarhis concerning the regularisation.

   [44]   Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462.

8. The plaintiff also complained of Westpac’s failure to provide him with a form which he could in turn have provided to his superannuation fund so as to secure the release of his superannuation monies for use in reducing the indebtedness to Westpac.  The evidence about this was scant.  The plaintiff did not adduce any evidence identifying the superannuation fund in question, the balance of his account in that fund which may have been available for release to Westpac, the requirements of the fund for such release, nor did he demonstrate that some intervention by Westpac was essential for the release of the superannuation monies.  The Court is simply not in a position to make findings about these matters.  I am not satisfied that the limited evidence which the plaintiff did give on this topic indicates unconscionable conduct by Westpac.  Further, the evidence discloses that the plaintiff did at one stage invoke the assistance of The Australian Banking Industry Ombudsman.  The nature of the intervention of that Ombudsman is not known.  However, I consider it reasonable to infer that if the provision of a form by Westpac had been a source of concern to the plaintiff, it is something which could (and would) have been addressed by that Ombudsman.

9. The plaintiff’s claim of unconscionable conduct in relation to the regularisation of the accounts, and in relation to his superannuation monies, fails.

   Section 55A(3) of the LPA

10. As noted earlier, s 55A(3) of the LPA permits the court to grant relief to a mortgagor against the enforcement by a mortgagee of certain of its rights.

11. The plaintiffs did not refer expressly to s 55A(3) and its application was not addressed in the parties’ submissions.  Nevertheless, I consider it appropriate to refer to it briefly.

12. While it is difficult not to have some sympathy for the position of Mrs Politarhis and the children, it is difficult to see that an order could appropriately be made under s 55A(3).  The indebtedness which Westpac seeks to enforce is an indebtedness arising under a loan contract into which both plaintiffs entered freely and voluntarily.  The plaintiff took advantage of a mistake by Westpac.  He has had the benefit of Westpac’s advance of credit.  Mrs Politarhis could have informed Westpac, by some means, shortly after 23 February 2004 of her husband’s conduct in taking advantage of its mistake.  The plaintiffs have not made any payment at all to Westpac since 29 March 2004.  Absent success by the plaintiff in his claim against ACCU, it does not seem that the plaintiffs have an intention at all of making any payment to Westpac.  The plaintiffs’ evidence makes it difficult to identify any “fair and equitable terms” upon which the Court could grant relief under s 55A(3).  On my findings, Westpac has not acted unconscionably.

13. The sympathy which one may have, in particular for Mrs Politarhis and the children, should not preclude this Court from allowing the ordinary consequences of a mortgage default to take effect.

14. It follows that Westpac is entitled to an order that the plaintiffs give up possession of the property at 4 Roxy Court, Reynella so as to enable it to sell the land for the purposes of recovering the monies secured by the mortgage.

    Other Matters

15. In the view I take, each of the plaintiffs’ claims fail. That means that it is unnecessary to consider an assessment of the plaintiffs’ damages and the pleas of contributory negligence and failure to mitigate loss. In the circumstances of the present case it is also undesirable to do so.

    Conclusion

16. For the reasons given above, each of the claims made by the plaintiffs is dismissed.  Westpac is entitled to an order that the plaintiffs give up possession of the property at 4 Roxy Court, Reynella.  I will hear from the parties as to the form of orders which are appropriate.