Sahin v National Australia Bank Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2011 0167

EDLIBAN SAHIN	First Appellant
	CETIN SAHIN	Second Appellant
v
NATIONAL AUSTRALIA BANK LIMITED	First Respondent
	NATIONAL AUSTRALIA FINANCIAL MANAGEMENT LIMITED	Second Respondent

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JUDGES	WARREN CJ, NEAVE JA AND FERGUSON AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	22 OCTOBER 2012
DATE OF JUDGMENT	18 DECEMBER 2012 (First Revision 2 May 2013 [32])
MEDIUM NEUTRAL CITATION	[2012] VSCA 317
JUDGMENT APPEALED FROM	National Australia Bank Ltd v Sahin [2011] VSC 505 (Dixon J)

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PROCEDURE – Application to stay proceeding – Time for making application – Parties agreed to take no steps while appeal pending in respect of separate proceeding – Whether any entitlement to make application for stay waived because of delay or because defence filed – Civil Procedure Act 2010 (Vic), s 18 considered

PROCEDURE – Court may rely upon what is disclosed by the record in determining whether there is a res judicata – Court may have regard to material establishing what was raised and determined in earlier proceeding when determining whether there is an issue estoppel or Anshun estoppel

ESTOPPEL – Res Judicata – Issue estoppel – Anshun estoppel – Wide ranging claims made in first proceeding including allegations of misleading or deceptive conduct, fraudulent misrepresentation, unconscionable conduct, negligence – Whether claim of for deceit could be pursued in later proceeding – Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, considered – Whether special circumstances apply where litigants represent themselves.

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APPEARANCES:	COUNSEL	SOLICITORS
For the Applicants	Mr E Sahin in Person
For the Respondents	Mr R D Shepherd	Turks Legal

WARREN CJ:

I have had the benefit of reading in draft form the reasons for judgment of Ferguson AJA. I agree with her Honour, for the reasons that she gives, that the appeal should be dismissed.

NEAVE JA:

I have had the advantage of reading the draft reasons for judgment of Ferguson AJA and I agree with her Honour that the appeal should be dismissed.

As a consequence of the National Australia Bank’s misleading and deceptive conduct, the Sahins had to conduct a trial to vindicate their rights. Their claim only succeeded after an appeal in which they were represented by Mr Sahin. They are now appealing against the stay of their counterclaim. Although Mr Sahin is not legally qualified, he made his arguments before us politely and capably.

In light of the conduct of the Bank and the problems Mr Sahin and his wife have encountered in the course of this litigation, it is not surprising that they now wish to attempt to recover damages for deceit. Because of their lack of legal representation, they did not appreciate the need to seek an amendment of their pleadings during the first appeal. I agree with Ferguson AJA that they were disadvantaged by ignorance of their rights and by the unfortunate failure of the Bank’s counsel to draw the counterclaim to the attention of the bench hearing the first appeal.

Nevertheless, I agree with her Honour, for the reasons she gives, that the Sahins’ claim for deceit is essentially the same cause of action that has already been litigated.

FERGUSON AJA:

Introduction and parties

Edliban and Cetin Sahin succeeded in a claim against National Australia Bank

Limited and National Australia Financial Management Ltd (‘the insurer’) on the basis that their conduct was misleading and deceptive in relation to an insurance policy for loan cover.[1] The effect of the Court’s orders was that the insurance policy which had been cancelled was reinstated and, subject to payment of any insurance premiums, the Sahins were relieved from making loan repayments whilst they were entitled to claim under the reinstated policy. The bank was also ordered to repay to them an amount of approximately $10,000 being the amount of the loan instalments that they had paid and which should have been paid by the insurer under the insurance policy. The claims made by the Sahins in that proceeding were not limited to allegations of misleading or deceptive conduct. Additional allegations included fraudulent misrepresentation, unconscionable conduct and breach of duty of care.

[1]As will be seen from what follows, the Sahins failed at first instance in the County Court but were successful on appeal: Sahin v National Australia Bank Limited & Ors [2011] VSCA 64.

The Sahins now wish to pursue a separate claim of deceit against the bank and the insurer for compensatory and punitive damages. In broad terms, the bank and the insurer say that the claim should be stayed because it concerns the same circumstances as were the subject of the earlier proceeding. They made application for a stay of the current proceeding on the basis that the claim is res judicata, that there is an issue estoppel and that Anshun[2] estoppel also applies. An Associate Judge granted that application and stayed the claim on the basis that the Sahins ‘are attempting to re-litigate matters dealt with by the Court of Appeal [which] were the subject of certain relief.’ The Sahins appealed from the stay order to a judge in the Practice Court. The judge dismissed the appeal and affirmed the orders made by the Associate Judge.[3] The Sahins appeal from the judge’s orders.
[2]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
[3]National Australia Bank Limited v Sahin & Anor [2011] VSC 505.

For the reasons which follow, the appeal should be dismissed. Primarily this is because the claim for deceit which the Sahins now wish to propound is substantially the same cause of action as that which has already been determined.

Background and the two proceedings

The Sahins borrowed $110,000 from the bank in July 2003 to help them to finance the building of a house. Ms Sahin took out loan insurance from the insurer. The policy was due for renewal on 12 August 2004. On 15 June 2004, the bank sent a letter to Ms Sahin in which it stated that the first loan had been fully drawn and that future loan repayments (including the loan insurance premium) were to be as specified. On 22 June 2004, the bank sent a letter to the Sahins and stated in part:

Following the review of the above loan account, and under your authority to the National regarding insurance premium renewal, the National Financial Management insurance premium has been debited to your account and requires a change to your repayments as follows: Your loan contract allows the Bank to vary the required repayments in these circumstances. Accordingly, your minimum weekly loan repayment is going to change to $179.20 with effect from 12 AUGUST 2004.

In fact, the renewal premium had not been debited to the account; it was to be debited on the renewal date which was 12 August 2004.

In early July 2004, the insurance policy renewal notice was sent to Ms Sahin with the date for renewal shown as 12 August 2004. In part the notice read:

We would like to update you on your National LoanCover Policy. The anniversary of your loan is approaching and we will automatically renew your policy and adjust your premium. Each year, we adjust the premium as your loan details change. The calculation of the new premium is based on your projected outstanding loan balance at policy renewal date, the remaining loan term, your contract repayment amount and frequency, your age, smoking status and the benefits you have selected under your policy.

The insurance cover was listed as being for the whole loan amount in the event of death or critical illness, and, in the event of disablement, $740 per month (which was sufficient to cover the adjusted weekly repayments). The notice then stated:

As requested, the annual National LoanCover premium will be automatically debited to your outstanding loan balance on the Policy Renewal Date. Your next loan repayment following the Policy Renewal Date will be adjusted to reflect the new premium and your total repayment amount.

By mid July 2004, the Sahins’ house was at the lock up stage. The loan having been fully drawn, the Sahins needed to borrow further money for furnishings and fittings. On 14 July 2004, they met with their bank manager, Ms Nicole Simmons (now Davis). The bank agreed to lend them an additional $23,000 on the basis that they would take out a new loan for $133,000 with $110,000 being used to repay the earlier loan.

On its terms, the policy of insurance terminated when the first loan was repaid. The Sahins did not realise this. They thought that the insurance would continue in force and would apply to the second loan. When Ms Sahin was subsequently injured in a workplace accident, the Sahins lodged a claim with the insurer. The insurer rejected the claim on the basis that the policy had been cancelled.

The Sahins sued the bank and the insurer in a County Court proceeding. They represented themselves in the proceeding. The claims that they made were cast broadly.[4] Relevant to the present appeal were allegations of misleading or deceptive conduct and fraudulent misrepresentation. In relation to the misleading or deceptive conduct claim, the Sahins pleaded that:
[4]The trial judge described the causes of action as including contract, misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act and s 9 of the Fair Trading Act, false representation, breach of the provisions of the Insurance Contracts Act, unconscionable conduct, estoppel, fraudulent misrepresentation, negligence and breach of the Consumer Credit Code: Sahin v National Australia Bank Limited & Anor (unreported, Anderson J, 27 November 2009 [37])

(a)the bank and the insurer represented that the Sahins had retained loan cover insurance from the insurer on and from the commencement of the second loan contract – in part the Sahins relied on what was stated in the renewal notice;[5]
(b)induced by the representation, the Sahins entered into the credit contract for the second loan;
(c)the representation was false and untrue;
(d)by reason of the representation (and other conduct) the bank and the insurer engendered and fostered in the Sahins the understanding and expectation that the insurer would pay the loan repayments under the second contract if Ms Sahin became disabled within the meaning of the policy;
(e)the Sahins acted and relied upon the understanding and expectation and altered their position as a result; and
(f)acting on the faith of the representations the Sahins refrained from obtaining insurance from an alternate insurer.

[5]See [11]-[12] above.

The fraudulent misrepresentation pleading concerns two matters:

(a)computer records which were relied on by the bank as to what occurred at the meeting on 14 July 2004 when the Sahins met with the bank manager about borrowing additional money; and
(b)a cancellation notice in relation to the insurance policy which the bank said had been sent to the wrong address for the Sahins on 5 August 2004 with a copy of the notice being sent to their correct address 15 months later on 14 November 2005.

The Sahins alleged that the claim that the cancellation notice had been sent in August 2004 was false and that there was a cover up of a mistake by the insurer in not sending a cancellation notice at the time when the policy was actually cancelled.

In relation to the computer records, the bank contended that at the meeting on 14 July 2004, Ms Davis had offered the Sahins loan cover for the new loan but they refused that offer. The bank relied in part on electronic notes on the bank’s computer system which it claimed Ms Davis had made the day after the meeting. The bank maintained separate electronic records for each of the Sahins. The relevant parts of the notes for Ms Sahin were as follows:

Borrowing:
15/07/2004 finalised $110K BICOE[6] need $23K to finish furnishing home and odd jobs around the house. Applied to rewrite hloan to $133K waiting on payslip at this point to finish processing.
[6]This is an acronym for Building in Course of Erection. This is how the loan was described in the bank’s records.
Protection:
15/07/2004 H & C taken, held NAB no loan cover wanted on loan, not interested
The entries for Mr Sahin read:

Borrowing:
15/07/2004 Hloan approved, $110K BICOE now complete looking for $23K extra funds to complete home. Waiting for updated payslip. Looking to re write home loan base VR hloan $133 requested.
Protection:
15/07/2004 insurance declined on loan cover. Home and contents held with NAB and I set up at loan drawdown

The Sahins alleged that these computer records were fraudulent and misleading in their contents.

The Sahins sought declaratory and other relief (including damages) in the proceeding.

Shortly before the trial of the proceeding the Sahins sought to change the mode of trial to judge and jury, to adjourn the trial and to add a claim for the tort of deceit. In relation to the last two matters, the memorandum in which details of their applications were set out stated:

We, the Plaintiffs rely on the following reasons to have the trial date adjourned to a later date;
1.The Plaintiffs time having been consumed by responding to the request for a third further and better particular by 20-08-2009.
2.The late schedule of the mediation hearing date of 14-09-2009. Which was originally ordered by Judge Anderson by the 31-07-2009.
3.The late schedule of Edlibans medical examination as… requested by the defendants for the 15-09-2009. After refusing to have her examined for the last five years.
4.To allow time for preparation of statement of claim to add action in tort.
The amendments to the statement of claim are as follows;
1.Adding a cause of action in tort based on the same facts as those already pleaded.
2.Damages for exemplary/punitive and compensatory.
3.Change the mode of trial to Judge and Jury.
4.The effect of the fraudulent documents having an emotional and financial impact on the Plaintiffs. The misleading documents have misled the banks area manager, internal review board and the Ombudsman. The misleading documents have also influenced our previous solicitors’ opinions, therefore requiring the Plaintiffs to self represent themselves in order to save their house from the repossession court order by the bank.
5.For a clearer and comprehensible statement of claim.

A judge[7] refused the applications for an adjournment and to have the mode of trial changed. There is no order that deals with the amendment application. However, the case proceeded on the basis that the Sahins were not permitted to amend their pleading and the trial began on the scheduled date.
[7]It was not the trial judge.

The Sahins did not succeed at first instance in the County Court and their claim was dismissed. The Sahins appealed. There were 16 grounds of appeal which included a ground that the judge had erred in not finding that the bank had engaged in misleading and deceptive conduct. A separate ground of appeal was that the judge ‘erred in finding in favour of [the bank and the insurer] after the overwhelming evidence of fraudulent misrepresentation, deceit and perjury at trial.’ The Notice of Appeal indicated that this ground of appeal was directed to the computer notes and the cancellation notice. The Sahins were successful on appeal on the basis that the bank and the insurer had engaged in misleading and deceptive conduct.[8] Hargrave AJA (with whom Harper and Hansen JJA agreed) delivered the leading judgment. The focus of his Honour’s reasoning was on the misleading and deceptive conduct ground of appeal. His Honour did not accept that Ms Davis had any recollection of the 14 July 2004 meeting but rather said her evidence was reconstruction based on usual practice and bank documents.[9] His Honour concluded that Ms Davis was an unreliable witness.[10] However, his Honour stated:

Notwithstanding Mrs Davis’s lack of recollection, I accept her evidence that she made (largely) contemporaneous computer notes of the 14 July meeting on the following day, 15 July 2004. Mr and Mrs Sahin challenge the authenticity of the computer notes, alleging that they are the result of a fraudulent conspiracy between Mrs Davis and an unnamed computer systems administrator employed by the bank to concoct false evidence to defeat their claim. For the reasons given by the trial judge, that contention should be rejected. However, for the reasons given below, the computer notes are as incomplete and ambiguous as Mrs Davis’s reconstructed oral evidence.[11]

[8]Sahin v National Australia Bank Limited & Ors [2011] VSCA 64.

[9]Ibid [36].

[10]Ibid [51].

[11]Ibid [44].

His Honour accepted the trial judge’s finding that the computer notes were not made fraudulently[12] and he described them as genuine.[13]
[12]Ibid [66].
[13]Ibid [72].

His Honour set out the contents of the computer notes to which I have referred in [18] above. In relation to what is recorded under the heading ‘Protection’ about loan cover, his Honour said:

The entries are … consistent with Mr and Mrs Sahin believing, in accordance with the renewal notice sent to them on 5 July 2004 and received only a few days before the 14 July meeting, that the loan insurance was already in place and would be automatically renewed, on the terms noted above. I infer that, in that belief, the reference by Mrs Davis to the need for ‘loan cover’ was probably dismissed out of hand by Mr Sahin in language indicating that he was ‘not interested.’[14]

[14]Ibid [50].

Later in his reasons, Hargrave AJA again referred to the computer notes. He stated:

In early February 2005, Mr Sahin spoke with Mrs Davis. He said in evidence that she was apologetic, confirmed that there was no loan cover in place but made no mention of the fact that the bank’s computer records contained her note that she offered loan insurance and it had been declined by Mr and Mrs Sahin. This evidence was not challenged. I infer that, at this time, Mrs Davis had no independent recollection of the 14 July meeting. Had she then recalled that she had offered Mr and Mrs Sahin loan insurance and they declined it, she is likely to have told Mr Sahin during this conversation of such a relevant matter. At that time, she must have made some inquiries of the bank’s records, in order to confirm to Mr Sahin that no loan insurance was in place and to offer an apology. However, she appears not to have thought to check her computer notes at this time. The fact that Mrs Davis needed to check her computer notes before generating any recollection, reconstructed or otherwise, indicates that the conversation during the 14 July meeting concerning loan insurance is likely to have been of a brief or passing nature.
It was not until a meeting with Mrs Davis and a more senior bank officer in September 2005 that the bank, for the first time, informed Mr and Mrs Sahin of Mrs Davis’s computer notes in respect of the 14 July meeting. Understandably, Mr and Mrs Sahin said that they were ‘stunned’ when they were belatedly told of the computer notes, and the seeds of their suspicion that the computer notes are not genuine were thus sown.[15]

[15]Ibid [61]-[62].

His Honour also dealt with some of the bank statements. He noted that the letter of 22 June 2004 stated in error that the insurance premium had been debited to the loan account. He also referred to the debiting of the second loan to their account and continued:

On the same day, the bank repaid the amount owing by Mr and Mrs Sahin in respect of the first loan ($110,822.26), debited Mr and Mrs Sahin’s loan account under the second loan with the loan establishment fee and paid the balance of the second loan into Mr and Mrs Sahin’s current account to be used for the completion of their home.

The final statement for the first loan account records that there was $0 rebate in respect of a ‘loan rebate’ in respect of a ‘policy’. It would appear this was a reference to the loan insurance policy, and that no refund of premium for the final week of the policy was payable. However, Mr and Mrs Sahin are unlikely to have understood this. Misleadingly, the final statement of account refers to a ‘loan rebate’ of $0, not ‘LoanCover rebate’.[16]

[16]Ibid [55]-[56].

Hargrave AJA also dealt with the cancellation letter in respect of the policy and said:

Because the insurer had not amended its systems to reflect the last known (correct) address of Mr and Mrs Sahin, the cancellation letter was, as with other correspondence which had been returned, sent to the wrong address. Mr and Mrs Sahin said in evidence that they did not receive it, and I accept their evidence. It is likely that this letter was also returned to the insurer but, unlike the earlier letter advising of automatic renewal of the loan insurance, it was not then sent to the correct address known to the insurer. It was not until after this dispute had crystallised that the insurer belatedly sent a copy of the cancellation letter to Mrs Sahin at her correct address. By then, it was too late for Mr and Mrs Sahin to obtain loan insurance for an event which had already happened.[17]

[17]Ibid [58].

Hargrave AJA concluded that a case based on false or misleading conduct was established by the Sahins and determined that it was unnecessary to consider the case based on breach of duty.[18] His Honour did not refer to any of the other claims raised by the Sahins. However, in view of his Honour’s rejection of the Sahins’ submissions that the computer notes were fraudulently created, it is clear that he also rejected their claim of fraudulent misrepresentation based on them. Similarly, given what his Honour said about the cancellation notice, it is clear that he treated that document as genuine too. It is implicit in his Honour’s reasons that he did not accept the fraudulent misrepresentation allegations so far as they relied on the cancellation notice.
[18]Ibid [75].

Having noted that misleading or deceptive conduct may arise from non‑disclosure or silence, his Honour continued:

In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited,[19] French CJ and Kiefel J stated:
In determining whether there has been a contravention of s 52 of the Trade Practices Act, it is necessary to determine “whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive”. [20]

In this case, the relevant conduct of the bank and the insurer included: (1) the way in which [the bank manager] dealt with the insurance cover in respect of the first loan, where a full explanation was given as to all relevant matters and a signed acknowledgment was obtained in accordance with the bank’s forms and procedures; (2) the correspondence sent by the bank and the insurer, and received by Mr and Mrs Sahin; (3) the failure of Mrs Davis to give Mr and Mrs Sahin a clear explanation of the effect on the loan insurance of the new loan structure insisted upon by the bank; (4) the failure of the insurer to send the cancellation letter to the correct address; and (5) the failure of Mrs Davis to apply the bank’s prudent procedure of obtaining a signed acknowledgment by Mr and Mrs Sahin concerning loan insurance. Viewed as a whole, that conduct was misleading and deceptive. As a result Mr and Mrs Sahin were led into error. They believed that the loan insurance covered the second loan and would be automatically renewed. As a result of being misled in this way, they lost the opportunity to obtain loan insurance cover, and have been left without cover in circumstances where Mrs Sahin is disabled and unable to work. The judge ought to have so found, and allowed their claim on this basis.
Moreover, by the cancellation notice being sent to the wrong address, the insurer acted in breach of contract. The policy requires such notices to be sent to the ‘last known’ address of the insured. The insurer clearly did not do this, as the correct address was well known and had previously been used. It appears that the insurer did not use its past experience and update its records. The evidence of Mr and Mrs Sahin that they did not receive the notice of cancellation should be accepted. Accordingly, the breach of contract also caused them to be deprived of the opportunity to make a fully informed decision as to their insurance needs. On the evidence as a whole, their evidence that they would have sought insurance if they had known they had no cover should be accepted. As I have said, the trial judge made no findings critical of their evidence.[21]

[19](2010) 241 CLR 357.

[20]Ibid [14].

[21]Sahin v National Australia Bank Limited & Ors [2011] VSCA 64 [75]-[77].

The appeal was allowed and orders were made under s 87(2)(b) of the Trade Practices Act 1974 (Cth). As I have noted, the orders essentially put the Sahins in the position that they would have been in if the policy had continued once the second loan was taken out.

Whilst the appeal was pending, the bank commenced a separate proceeding in this Court for possession of the Sahins’ property. The Sahins brought a counterclaim in that proceeding against the bank and the insurer for the tort of deceit claiming compensatory and ‘exemplary/punitive’ damages. It is this counterclaim that the Sahins wish to pursue. Some of the interlocutory steps in the proceeding were completed but at some stage the parties agreed to await the outcome of the appeal from the County Court orders before taking additional steps to bring the claim for possession and counterclaim on for trial. It seems that Hargrave AJA was aware of the claim for possession. His Honour stated:

the bank commenced proceedings in the Supreme Court seeking to enforce its mortgage and recover possession of Mr and Mrs Sahin’s home. In response, Mr and Mrs Sahin commenced their proceedings in the County Court. It would appear that the bank’s enforcement proceeding has been adjourned pending the outcome of the County Court proceeding and determination of this appeal.[22]
It is unclear whether the Court of Appeal was aware of the Sahins’ counterclaim.

[22]Sahin v National Australia Bank Ltd & Ors [2011] VSC64 [64].

Once the outcome of the appeal was known, the bank sought to discontinue the possession proceeding and sought the order which was made by the Associate Judge to stay the counterclaim.

The counterclaim includes a number of introductory paragraphs in the same or similar terms to the pleading in the first proceeding. The following allegations are then made in the counterclaim:

(a)the bank and the insurer represented that the Sahins had retained loan cover insurance in respect of the second contract – the particulars include reference to the letter of 22 June 2004 (to which I have referred in [9] above), the renewal notice (to which I have referred in [11] above) and a statement alleged to have been made by Ms Davis;
(b)the Sahins entered into the second credit contract in reliance on the representations;
(c)Ms Sahin became ‘disabled’ within the meaning of the insurance contract and made a claim to be indemnified under the policy;
(d)the representation in (a) was false because the Sahins did not have loan cover insurance;
(e)the bank and the insurer failed in their duty of care by negligently making the representation and refused to indemnify Ms Sahin under the policy;
(f)further or alternatively, in breach of the policy terms and in breach of the Insurance Contracts Act 1984 (Cth) the insurer refused to indemnify Ms Sahin under the insurance policy;
(g)further or alternatively, in breach of ss 137 and 139 of the Consumer Credit Code and s 52 of the Trade Practices Act the bank refused to indemnify Ms Sahin;
(h)due to the conduct of the bank and the insurer, the Sahins refused to make further repayments under the second loan contract;
(i)by reason of the above, the bank and the insurer resorted to fraudulent misrepresentation:
(i)the bank represented that on 14 July 2004 it had offered loan cover insurance and that offer was declined and that information was entered onto the bank’s computer on 15 July 2004 – the particulars of this allegation are an oral representation made by a bank officer on 21 September 2005 and the computer notes;
(ii)the bank represented that the bank statements did not contain the premium deductions said to have been deducted in the letter of 22 June 2004 – the particular of this allegation is the June 2004 bank statements alleged to have been presented to the plaintiffs in May or June 2009;
(iii)the insurer represented that it had sent a notice of cancellation to the Sahins on 5 August 2004 – the particular of this allegation is the notice received by the Sahins on 14 November 2005;

(j)at the time of making these representations, the bank and the insurer knew the representations were ‘false, misleading and deceptive and made fraudulently in tort of deceit, without any regard as to the effect of the misrepresentations’ on the Sahins. The particulars are said to be that Ms Davis did not offer loan cover insurance to the Sahins on 14 July 2004 or at any time after that; Ms Davis did not enter the computer notes on 15 July 2004 or at any time after that; the bank statements are fabricated; the insurer did not send a cancellation notice on 5 August 2004 to the Sahins’ former address;
(k)relying on those representations, the bank filed a writ to repossess the Sahins’ property and the bank’s intention was to take advantage by deception;
(l)the fraudulent misrepresentations were made in ‘tort of deceit’ by the bank and the insurer with the intention of depriving Ms Sahin of indemnity under the insurance policy and in contumelious disregard for the rights of the Sahins and the loss suffered by them;
(m)the bank and the insurer are joint and several tortfeasors liable in deceit for fraudulently misrepresenting documents and facts with the intent of causing the Sahins to lose their entitlements under the insurance contract and incur loss and damage in the process.

The prayer for relief claims compensatory damages, ‘exemplary/punitive damages’, costs, interest and such other orders as the Court deems fit.

The bank and the insurer filed a defence to the counterclaim. Part of that defence pleaded that the Sahins are estopped from bringing the counterclaim by reason of the alleged causes of action and allegations made having been the subject of judicial determination and final judgment given in the County Court.

The judge’s reasoning

As I have noted, an Associate Judge stayed the counterclaim under r 23.01(1)(c) of the Supreme Court (General Civil Procedure) Rules 2005. So far as relevant, that rule provides that where a proceeding is an abuse of the process of the Court, the Court may stay the proceeding. The Sahins appealed to a judge sitting in the Practice Court. The appeal was a rehearing under r 77.06.

The judge set out the history of dealings between the Sahins, the bank and the insurer.[23] His Honour summarised the allegations in the County Court proceeding and the judgment on appeal.[24] The judge then summarised the causes of action alleged in the counterclaim.[25] His Honour noted that although the allegations in the counterclaim are stated in different terms, they are based in the same circumstances as the appeal judgment in the first proceeding.
[23]National Australia Bank Limited v Sahin & Anor [2011] VSC 505 [6]-[10].
[24]Ibid [11]-[15].
[25]Ibid [16]-[18].

The judge observed that a party may rely on r 23.01, s 63 of the Civil Procedure Act 2010 (Vic) and/or the Court’s inherent jurisdiction in seeking summary dismissal of a claim. He held that there was no substance in the submission by the Sahins that there was unacceptable delay by the bank and the insurer in seeking summary judgment on the counterclaim. Nor was he satisfied that there was prejudice caused by any delay.[26]
[26]Ibid [20]-[21].

His Honour then turned to consider the similarity between the two proceedings. He stated:

Mr Sahin did not dispute that, in substance, the deceit claim arose on the same facts as were litigated to judgment in the first proceeding, and that Mr Sahin thought so from at least three weeks prior to the County Court trial. Mr Sahin frankly conceded that he thought the insurance proceeding and deceit claim should be heard separately, but he later recognised that the deceit claim should be heard with the insurance claim in the one proceeding. Mr Sahin’s opposed application, made approximately three weeks prior to commencement of trial, to amend the claim in the County Court proceeding to include the deceit claim, failed. That application was not made to the trial judge. However, it was renewed before and rejected by the trial judge at commencement of the trial.[27]

[27]Ibid [22].

On the appeal, the parties informed the Court that there was no renewal of the application to bring the deceit claim before the trial judge. In any event, the judge observed that the decision to refuse the amendment application was not appealed and, more significantly, this Court considered all of the material facts on which the deceit claim is said to be based. The judge noted that some of the grounds of appeal directly raised a claim for fraudulent misrepresentation.[28]
[28]Ibid [23].

The judge next considered the applicable principles. He noted that any estoppel stems from the appellate decision and stated that it was necessary to identify the causes of action upon which the Sahins succeeded in the first proceeding. He said:

Whether a cause of action estoppel or an issue estoppel exists is determined objectively. A cause of action estoppel will be found where the cause of action in the later proceeding is in substance the same as that litigated to judgment in the earlier proceeding. For issue estoppel, the test is whether the precise question of fact or law sought to be litigated in the later proceeding was decided as a fundamental basis for the decision in the earlier proceeding. The scope of the defence widens, by reference to Anshun principles, where the cause of action or precise question of fact or law in the later proceeding is a new point that properly belonged to the subject of litigation in the earlier proceeding.[29]

[29]Ibid [27].

His Honour noted that there is some imprecision in the phrase ‘cause of action’. He referred to and agreed with the following observations of Davies J in Re Twenty-First Larena Pty Ltd; Maximova v Goodin:[30]

As the cases illustrate, the doctrine may apply to causes of action other than the precise one sued on in a preceding action where the cause of action previously adjudicated is substantially the same as the cause of action in the subsequent proceeding ... it is not the legal form of a cause of action to which consideration should be directed but rather, whether the controversy in the subsequent action, as a matter of substance, is the same as the controversy determined in the first proceeding.[31]

[30] [2010] VSC 84.

[31]Ibid [23].

His Honour next considered whether the resolution of the first proceeding by this Court effectively determined the deceit cause of action. He observed that Hargrave AJA dealt with and made a number of findings of fact. He continued:

In particular, Hargrave AJA dealt at length with the evidence at the trial of the conversations between the Sahins and Mrs Davis on 14 July 2004, including the computer records generated in respect of that conversation. He also dealt with the entries in [the bank] statements and with the issues concerning notice of cancellation of the policy. These matters are the allegations particularised in the counterclaim as the basis of the deceit claim. Each of these issues formed part of the finding made by the Court of Appeal, that misleading or deceptive conduct had been established against [the bank] and [the insurer]. Further, Hargrave AJA examined specifically the computer notes, a central plank in Mr and Mrs Sahin’s allegations in the counterclaim, in the context of the claims pleaded in the first proceeding, finding that the Sahins made out a case of false or misleading conduct.[32]

[32]National Australia Bank Ltd v Sahin & Anor [2011] VSC 505 [32].

The judge noted that there were no findings about whether the bank or the insurer engaged in the conduct that they did with the intent or state of mind necessary to make out the tort of deceit. However, his Honour stated that the issue of fraudulent intention was central to the evidentiary findings made by Hargrave AJA although deceit was not a claim in the proceeding at trial. His Honour observed that it ‘may be open to doubt whether the Court of Appeal would have re-examined the evidence as it did had Mr and Mrs Sahin persuaded the Court that the County Court erred in refusing the amendment to include a claim of deceit in order that the Sahins might pursue a claim for exemplary damages.’[33] His Honour continued:

The central misrepresentation relied on by the Sahins in the counterclaim is the statement of Mrs Davis in the 14 July meeting, which I have referred to above. The evidence at trial involved examination of issues of fraudulent intent on the part of Mrs Davis in the 14 July meeting. It was put in cross‑examination of witnesses, and in submissions, as critical to accepting the Sahins’ contention that they did not decline the offer of loan insurance for the refinancing or the further advance …that the contrary proposition of Mrs Davis was a fraud.[34]

[33]Ibid [32] n 19.

[34]Ibid [34].

His Honour observed that Hargrave AJA had made these findings because of the trial judge’s reasoning in dismissing the claim.

The judge held that the plea of res judicata had been substantiated and that the counterclaim should be summarily dismissed. He stated:

In my view, there can be no doubt that the precise questions of fact that support the cause of action in deceit now being asserted, were not only squarely raised in the earlier proceeding but were fundamental to the finding in the earlier proceeding of deceptive or misleading conduct on the part of [the bank] and [the insurer]. In the circumstances as they unfolded, the examination of the evidence at the trial by the Court of Appeal included examination of the issue of fraudulent intention, even though deceit was not a cause of action before the court. Upon careful examination of the issues that were raised and decided in the first proceeding, the substance of that proceeding is clearly the same as the substance of this proceeding. The consideration of the essential facts on the proposed deceit claim in the first proceeding has merged into the judgment on the statutory claim in the first proceeding. Moreover, in the Court of Appeal, those factual disputes were decided in favour of Mr and Mrs Sahin. They founded the judgment entered in their favour. In the result they were afforded substantive relief. There is a res judicata.[35]

[35]Ibid [38].

His Honour also held that the question of damages had been resolved by the judgment in the first proceeding. Having observed that there is no plea of loss and damage in the counterclaim, the judge noted that the Sahins assert an entitlement to exemplary damages and that there was a suggestion of aggravated or mental distress damages as well. He reasoned that if the counterclaim was permitted to proceed and resulted in a favourable outcome for the Sahins the judgment delivered would be inconsistent with this Court’s judgment. This led the judge to the conclusion that there should not be a second trial. He said:

The issue of damages has been conclusively determined. The Court of Appeal necessarily considered the suitability of an award of damages as the appropriate form of relief. The statutory power under s 87(2) to make such order as the court thinks appropriate against a person who has engaged in deceptive or misleading conduct is enlivened where the court finds that the plaintiff has suffered or is likely to suffer loss or damage by the defendant’s conduct in contravention of the Act, and where the court considers that the order it proposes to make under s 87 will compensate the plaintiff in whole or in part for the loss or damage, or will prevent or reduce the loss and damage.
This is what has occurred in the first proceeding. The court considered that restitution of the parties to the position they were in before the wrongful conduct of [the bank] and [the insurer] was the form of judgment that would best compensate the Sahins. The entitlement of the Sahins to damages was recognised but, rather than award compensatory compensation, a statutory restitution order was made. The relief granted used the progressive remedies afforded by the Trade Practices Act.[36]

[36]Ibid [41]-[42].

His Honour observed that punitive damages are not a head of damages that can be awarded in isolation and that they must be considered by the court when assessing compensatory damages. His Honour reasoned that there are no compensatory damages to be assessed in this case because of the restitutionary character of the judgment entered.[37] His Honour continued:

A further difficulty is that exemplary damages are not available under the Trade Practices Act. There was no impediment to raising the deceit claim on appeal. An appeal ground could have been directed at the County Court’s refusal of the application to amend, to add the deceit claim to the trial. Had they wished to pursue a claim to obtain punitive damages against [the bank] and [the insurer], the Sahins needed to reject the offer of relief under s 87 of the Trade Practices Act and press for damages in tort instead. While it seems fanciful to expect that, by that road, the Sahins might have arrived at a better outcome, the fact is that it did not happen. The Sahins no longer have a claim for compensatory damages. They no longer have any claim for damages arising out of the conduct identified by the Court of Appeal as the basis for the relief granted in the first proceeding. There is an issue estoppel on the issue of damages.[38]

[37]Ibid [43].

[38]Ibid [44].

Finally, the judge held that the claim for damages made in the counterclaim is a claim that could and should have been raised and resolved in the first proceeding. He stated:

If one accepts that an Anshun estoppel will not arise when the litigant was unable to raise the claim in the first proceeding, and the circumstances of the refused amendment satisfy that requirement in favour of the Sahins, a matter which I cannot determine on the material before me, the exclusion of the Anshun estoppel can only extend to the original judgment in the County Court. The Court of Appeal was perfectly placed to consider, not only whether the deceit claim ought to have been allowed to be raised, but also whether damages in deceit would have provided a better outcome for the Sahins.
However, that the Sahins could have raised the claim or ground of appeal in the first proceeding is not sufficient to raise the estoppel. The test is ‘based on the reasonableness ... of the conduct of a litigant in earlier proceedings’. For the operation of the estoppel, the fact that the matter could have been raised before the Court of Appeal may not mean that it should have been raised. The ‘unreasonableness’ criterion involves evaluation of what the Sahins could reasonably have been expected to do in the first proceeding.[39]

[39]Ibid [45]-[46].

His Honour was satisfied that permitting the counterclaim to proceed carried a real and appreciable risk of an inconsistent determination of rights about the conduct of the bank and the insurer in relation to the circumstances of refinancing of the loan facility and the cancelling of the insurance policy. His Honour expressed the view that there is a close nexus between the torts of deceit and negligent misrepresentation and the statutory cause of action under the Trade Practices Act, with the consequence that ‘the controversy in a consumer deceit or negligent misrepresentation action… is often regarded as in substance the controversy in a s 52 claim’ and that it is unusual to see a s 52 claim pursued without corresponding common law claims. His Honour concluded that it was unreasonable of the Sahins not to raise their grievance that they were not permitted to pursue a deceit claim or their claim to aggravated or exemplary damages, in this Court.[40]
[40]Ibid [48].

Grounds of appeal

The grounds of appeal fall into four broad categories – general grounds and those relating to res judicata, issue estoppel and Anshun estoppel. The questions raised by the grounds of appeal for each category are as follows:

General grounds
(a)Was the judge in error in finding that the bank and the insurer had not waived their right to bring an application for a stay of the counterclaim?
(b)Was it open to the judge to make a finding of estoppel based on the material relied on by the bank and the insurer in support of the application?
Grounds relating to res judicata
(c)Did the judge err in holding that the deceit claim is in substance the same cause of action as the statutory cause of action?
(d)Did the judge err in finding that the same facts support both the misleading and deceptive conduct claim under s 52 of the Trade Practices Act and the tort of deceit claim which the Sahins wish to pursue?
Grounds relating to issue estoppel
(e)Did the judge err in finding that there was an issue estoppel in respect of damages?
(f)Were the findings made by the Court of Appeal in respect of the allegations of fraud conclusive and necessary to support the judgment?
(g)Can there be any issue estoppel when the Sahins were successful in the earlier proceeding and had no ability to appeal from those parts of the Court’s findings in respect of fraud?
Grounds relating to Anshun estoppel
(h)Was the judge in error in concluding that a favourable outcome in the counterclaim would be inconsistent with this Court’s judgment in the first proceeding?
(i)Was the judge in error in finding that it was unreasonable not to raise the deceit claim on the appeal when the Sahins had not been permitted to pursue it at trial, the bank and the insurer had opposed the application to amend and the counterclaim was on foot at the time of the appeal?
(j)Having concluded that if the counterclaim was permitted to proceed there was a real and appreciable risk of an inconsistent determination of rights about the conduct of the bank and the insurer, should the judge have permitted the counterclaim to proceed because there is a likelihood of a finding of fraud and establishment of the claim in deceit?
(k)Should the bank and the insurer have sought a stay of the counterclaim in the Court of Appeal?

General Grounds
(a)Was the judge in error in finding that the bank and the insurer had not waived their right to bring an application for a stay of the counterclaim?

The counterclaim was filed on 16 July 2010. The application to stay the counterclaim was filed on 19 April 2011. As I have said, the stay was granted under r 23.01(1)(c)(i) which provides that where ‘a proceeding generally or any claim in a proceeding… is an abuse of the process of the Court… the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.’

The Sahins contended that the application for a stay was brought too late. They submitted that as soon as the bank or the insurer determined that the counterclaim was an abuse of process, they should have made the application. They submitted that the bank and the insurer having elected to file an appearance and a defence to the counterclaim, they cannot later decide to pursue an alternative course of seeking a stay. They relied on s 18 of the Civil Procedure Act 2010 (Vic). That section provides:

A person to whom the overarching obligations apply must not make any claim or make a response to any claim in a civil proceeding that-
(a)       is frivolous; or
(b)       is vexatious; or
(c)       is an abuse of process; or
(d)does not, on the factual and legal material available to the person at the time of making the claim or responding to the claim, as the case requires, have a proper basis.

It seems from their submissions that the Sahins have interpreted that provision to mean that if a claim is an abuse of process, the defendant must not respond to it. However, that misunderstands the provision. Section 18(c) forbids a person from making a claim that is an abuse of process or defending a claim where the defence (not the claim) is an abuse of process.

The Sahins also relied on Magrath v Hardy.[41] In that case, the defendant failed to plead res judicata. Tindal CJ held that the defendant had ‘waived any benefit he might have derived from the estoppel.’[42] That case is of no assistance to the Sahins for here, the bank and the insurer have included in their defences to the counterclaim a plea of res judicata.
[41](1838) 4 Bing NC 782.
[42]Ibid at 798.

The Sahins also relied on the decision in Republic of India v India Steamship Co Ltd.[43] In that case, one of the arguments concerned whether a defence based on s 34 of the Civil Jurisdiction and Judgments Act 1982 could be the subject of waiver or estoppel. That section provided:

No proceedings may be brought by a person in England and Wales or Northern Ireland on a cause of action in respect of which a judgment has been given in his favour in proceedings between the same parties, or their privies, in a court in another part of the United Kingdom or in a court of an overseas country, unless that judgment is not enforceable or entitled to recognition in England and Wales or, as the case may be, in Northern Ireland.

The House of Lords held that a defence based on this provision could be met by a plea of waiver or estoppel. Lord Goff of Chieveley stated:
it was urged by the defendants that the matters invoked by the plaintiffs as giving rise to a waiver or estoppel could not have any such effect; and accordingly, even if such a plea was open to them, your Lordships should nevertheless not disturb the order that the plaintiffs’ statement of claim be struck out. I must confess that I would be most reluctant, as a matter of principle, to strike out a pleading which raises an issue of this kind, which is essentially one that should be decided on the evidence. The present claim is for a very large sum of money, and the defence of res judicata is a highly technical defence which has the effect, where it applies, of precluding a decision on the merits. The plaintiffs’ plea of waiver or estoppel has not yet been pleaded; but it is plain that it relates to events in India as well as in this country. I for my part do not think it would be right for this plea to be rejected summarily in the way suggested by the defendants. I would therefore allow the appeal, and remit the action generally to the Admiralty judge, with the effect that he will be able to order the necessary pleadings and determine the issue in the ordinary way.[44]

[43][1993] AC 410.

[44]Ibid 424.

Similarly, the Sahins sought to rely on Ketteman v Hansel Properties Ltd[45] where leave to amend a defence to include a limitation point was refused as the application was not made until closing submissions. Lord Griffiths stated that a defendant ‘should not be permitted to fall back upon a plea of limitation as a second line of defence at the end of the trial when it is apparent that he is likely to lose on the merits.’[46]
[45][1987] AC 189.
[46]Ibid 219.

It seems that the Sahins may have equated r 23.01 of the Rules with the defence provided in s 34 of the Civil Jurisdiction and Judgments Act 1982 in Republic of India v India Steamship Co Ltd and a limitation defence, such as that with which the House of Lords was concerned in Ketteman v Hansel Properties Ltd. What the House of Lords was concerned with in the Republic of India case was not whether the defendants had waived their right to seek summary dismissal of the claim (that is, the equivalent of a r 23.01 application) but rather whether they had waived their right to rely on the res judicata defence in s 34.

Similarly in Ketteman, the House of Lords was concerned with a failure to plead a defence until so late in the proceeding that leave to amend was refused. The case is distinguishable. First, a party makes an application under r 23.01 – it does not plead the rule whereas a limitation point is properly part of a pleading. Second, the application under r 23.01 was not made close to the conclusion of a trial. Third, the grounds upon which the application made under r 23.01 was based were included in the pleaded defence.

There is simply no basis for a contention that the bank and the insurer waived their right or made an election not to pursue an application to stay the counterclaim. Nor did they make any representation that they would not do so. The mere filing of an appearance and defence to the counterclaim does not amount to an election, waiver or representation in respect of an application for a stay. This is particularly so in circumstances where the counterclaim was brought at a time when the appeal from the County Court judgment was pending and the parties effectively agreed to put the possession proceeding and counterclaim on hold until the outcome of the appeal was known.

Finally, the Sahins relied on a passage from Bernard Cairns’ text, Australian Civil Procedure, in which the author states:

When the plaintiff delivers the statement of claim the defendant must consider what course to take. If an application is to be made in relation to the statement of claim, it should be filed before the delivery of the defence. Applications to strike out embarrassing pleadings, or to strike out the whole claim for failure to show a cause of action should be made as soon as possible after the delivery of the statement of claim.[47]

[47]Bernard Cairns, Australian Civil Procedure (Thomson Reuters, 9^th ed, 2011) at 255.

Whilst it is preferable that applications concerning statements of claim be made as soon as possible after their delivery, it is not uncommon for such applications to be made after a defence has been filed. Sometimes, as in this case, the basis for the application is contained within one of the pleas in the defence. In the context of this case where:

· the parties had agreed, as it were, to freeze the possession proceeding and counterclaim;

· there was no prejudice to the Sahins; and

· the defence raised the basis for the stay application,

it was reasonable to permit the application for a stay to proceed after the defence had been filed.

This ground of appeal must fail.

(b)Was it open to the judge to make a finding of estoppel based on the material relied on by the bank and the insurer in support of the application?

The Sahins complained that the bank and the insurer had not provided evidence supporting the application for a stay. Rather, the bank and the insurer relied on the facts set out in Hargrave AJA’s reasons. The Sahins contended that they therefore did not have an opportunity to rebut those facts at the hearing of the application.

This issue seems to arise from a misunderstanding on the part of the Sahins as to what the Court is required to consider and the materials to which the Court would have regard in determining a stay application in cases like the present. In considering such a stay application, the Court is concerned to ascertain what was raised and determined in the earlier proceeding. It is not concerned with evidence that might go to establish that the findings in the first case were wrong. In relation to issue estoppel and Anshun estoppel, the Court may have regard to any material that goes to establish what was raised and determined in the earlier proceeding.[48] In relation to res judicata, the court is confined to what is disclosed by the record.[49] Here all that was necessary for the Court to look at were the pleadings in the two proceedings, the relevant orders and reasons for them.
[48]Jackson v Goldsmith (1950) 81 CLR 446, 467; Rogers v R (1994) 181 CLR 251 at 263 (per Brennan J).
[49]Ibid. See, however, the view expressed by the learned author that the same material should be available to a court in considering whether there is a res judicata as it may look at in respect of issue estoppel and Anshun estoppel: KR Handley, Spencer Bower and Handley Res Judicata (Lexis Nexis, 4^th Ed, 1996) [7.16]

This ground of appeal also fails.

Res judicata
(c)Did the judge err in holding that the deceit claim is in substance the same cause of action as the statutory cause of action?
(d)Did the judge err in finding that the same facts support both the misleading and deceptive conduct claim under s 52 of the Trade Practices Act and the tort of deceit claim which the Sahins wish to pursue?

Res judicata prevents a party from litigating a cause of action twice. In Thoday v Thoday,[50] Diplock LJ explained:

…cause of action estoppel…prevents a party from asserting or denying as against the other party, the existence of a particular cause of action, the existence or non-existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist ie judgement was given upon it, it is… merged in the judgment. If it is determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam.[51]

[50][1964] P 181 CA.

[51]Ibid 197-198.

In Port of Melbourne Authority v Anshun Pty Ltd,[52] Brennan J noted that there is an imprecision in the phrase ‘cause of action’. He said:

the term cause of action… is sometimes used to mean the facts which support a right to judgment; sometimes to mean a right which has been infringed, and sometimes to mean the substance of an action as distinct from its form. Imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action. The foundation of the rule, whether it be termed res judicata, or cause of action estoppel or judgment recovered, is the merging of the cause of action in the judgment.[53]

[52](1981) 147 CLR 589.

[53]Ibid 610-611 (Citations omitted).

The Sahins submitted that the judge erred in holding that the deceit claim is in substance the same cause of action as the statutory cause of action on which judgment was based in the first proceeding. They submitted that in the present case the cause of action (both in form and substance) and the relief sought were separate in both proceedings. They contended that the first action concerned the insurer’s failure to indemnify under the insurance policy which was not dependent upon proof of fraud, whereas the action for deceit in the second proceeding does rely on fraud. Further they submitted that they had sought orders for ‘specific performance’ of the insurance contract and that is what they obtained in the first proceeding whereas now they seek damages for deceit.

The Sahins sought leave to add a further and related ground of appeal that the judge erred in finding that the same facts support both causes of action. That application was not opposed and I would grant leave. The Sahins submitted that the first proceeding concerned events that occurred prior to the litigation whereas the deceit claim concerns events that occurred after they brought their claim. The Sahins conceded that the first half of the counterclaim pleading contains facts similar to those that were pleaded in the first proceeding. They say that this was necessary in order to inform the judge who will hear the counterclaim of the events and motives giving rise to the alleged fraudulent conduct of the bank and the insurer. However, they say that the same facts can give rise to separate proceedings.

The Sahins relied on Goldrei, Foucard & Son v Sinclair and Russian Chamber of Commerce in London.[54] In that case, the plaintiffs had brought a claim against an individual (Mr Sinclair) and a company alleging false and fraudulent representations which they said induced them to enter into a contract with the company and to pay it 105l. They claimed damages against both Mr Sinclair and the company and against the company only, rescission of the agreement and repayment of the 105l together with interest. The company failed to file a defence and judgment was entered against it for rescission and repayment of the 105l and interest. The company did not pay and the case proceeded to trial against Mr Sinclair. The plaintiffs succeeded and were awarded 105l in damages. Mr Sinclair appealed on the basis that he was a joint tortfeasor with the company and judgment against the company was a bar to the action against him for the same cause of action. Pickford LJ said:

A person who has been induced by misrepresentations to take shares in a company has two remedies open to him. He may bring an action against the company only for rescission of the contract and return of the money paid, or he may bring an action for fraudulent representations against both the company and its agent where the two have joined to commit the fraud. He may also take both these courses if he wish. In the former case, that is, an action for rescission and return of the money paid, the plaintiff need not prove fraud, but will succeed if he establish an innocent misrepresentation. He can in such an action obtain no relief against the agent of the company. If he do prove fraud in an action solely for rescission and return of the money he is in no better position than if he had proved innocent misrepresentation. In an action for damages arising from misrepresentations made jointly by the company and its agent he cannot succeed unless he prove that the misrepresentations were made fraudulently, and the measure of damages in such an action is not necessarily the amount of the money paid to the company. The question seems to me to be whether these two actions are founded on the same or different causes of action. A cause of action has been defined to be every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. In these two actions there is a fact, that is fraud, which if traversed must be proved to support the action for damages for misrepresentation, but which need not be proved in an action for rescission, and if disproved still leaves the plaintiff entitled to a judgment if he prove misrepresentation in fact. In addition the remedy is against the company only in the latter case and against both the company and its agent in the former, and the measure of relief is not necessarily the same. I think, therefore, that the two forms of action are founded upon different causes of action.[55]

[54][1918] 1 KB 180.

[55]Ibid 186-187. Goldrei was concerned with the common law rule that a joint tortfeasor is relieved of liability if judgment has been obtained against the other tortfeasor on the same cause of action. That rule has been altered by statute: Wrongs Act 1958 (Vic) ss 24AA, 24AB.

In Trawl Industries of Australia Pty Ltd (recrs and mgrs appted) v Effem Foods Pty Ltd,[56] Trawl had entered into heads of agreement to sell fish to Effem. Trawl sought damages for repudiation against Effem. By cross claim Effem alleged that it was Trawl that had repudiated the agreement. Trawl raised other issues including estoppel and contravention of s 52 of the Trade Practices Act 1974 (Cth) but by agreement these issues were to be tried separately. Effem succeeded in the repudiation case. There was an unsuccessful appeal on the same issues that had been tried. The other issues never went to trial. However, there was an order dismissing an appeal against the entry of the verdict and judgment in favour of Effem on Trawl’s further amended points of claim which included the s 52 allegations. Whilst the appeal was pending, Trawl, its directors and some of its lenders commenced a separate proceeding seeking to recover under s 82 of the Trade Practices Act for alleged loss or damage suffered by reason of contravention by Effem of ss 52 and 53. Damages were also claimed for negligence. The claim was based on allegations of representations by Effem made before entry into the heads of agreement. Effem sought orders staying or dismissing the proceeding. Gummow J refused the application so far as it concerned the directors and lenders but stayed the proceeding by Trawl. His Honour observed that the court’s attention must be on the substance of the action not on its form.[57] He stated that Trawl sought to recover loss measured in the same way and in the same quantum in both proceedings. Some (although not all) of the misrepresentations that were alleged in the second proceeding were included in the first proceeding and they all preceded the heads of agreement. His Honour noted that although not all of the issues had been taken to trial, the whole action was disposed of by the orders that were made. The claims in the later proceeding were in evidence in the first proceeding and ‘the same evidence would be led to prove the case Trawl propounded in its pleadings in both actions.’[58] His Honour held that, as a matter of substance, the controversy between the parties in the two proceedings was the same, even though no claim had previously been brought in negligence.[59]
[56](1992) 36 FCR 406.
[57]Ibid 418.
[58]Ibid 422.
[59]Ibid. Trawl did not appeal from the decision. Effem appealed from the orders made in relation to the directors and lenders: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (recs and mgrs appted – in liq) (1993) 43 FCR 510.

The decision in Trawl is not directly in point. There the claims concerned the statutory claim for misleading or deceptive conduct and negligent misrepresentation which are similar in nature. Here, there is the additional element of fraud in the alleged tort of deceit. Further, in Trawl, all of the misrepresentations were alleged to have been made before the heads of agreement were entered into. Here, only some of the matters complained of occurred before entry into the second loan.Indeed, some deceitful conduct is alleged to have occurred after the commencement of the first proceedings by the Sahins.

Nevertheless, the approach of Gummow J in Trawl recognises the real vices which the doctrine of res judicata is designed to address – that there should be an end to litigation and that a party should not be vexed twice in respect of the same dispute. Consequently, the Court should consider the substance of the controversy which gives rise to the cause of action. Minor differences between the elements of two claims should not be determinative as to whether the two causes of action are the same. In other words, the legal label attached to a particular cause of action ought not lead to the conclusion that a differently labelled cause of action which is substantially the same is not the same cause of action.

In my view, the deceit claim that the Sahins now wish to pursue is substantially the same as the cause of action that was litigated previously. The same facts give rise to the relief sought in each proceeding. Whilst dishonesty and intent (which are essential if deceit is to be established) are not elements of a statutory claim for misleading and deceptive conduct, nevertheless all of the matters relevant to the question of fraud for the proposed claim were pleaded and dealt with by Hargrave AJA. In this regard, although the pleading did not allege deceit as such and the case proceeded on the basis that leave to amend to add such an explicit claim was refused (even though there was no order to this effect), nevertheless fraudulent misrepresentation was alleged in respect of the bank computer records and the cancellation notice and findings were made in respect of their authenticity. The Sahins did not succeed in their fraudulent misrepresentation claim. The Sahins seek to restrict the operation of res judicata to the claim on which they succeeded and to draw a distinction between that and the claim that they bring in the counterclaim. However, this is too narrow a view. Res judicata applies not only in respect of the claim upon which they succeeded but in respect of all the claims that they propounded. As Diplock LJ explained in the passage from Thoday set out in [28] above, the doctrine applies where the existence or non-existence of a cause of action has previously been determined. This position concerning res judicata must be contrasted with that in relation to issue estoppel. As discussed below, issue estoppel may not arise in respect of a particular matter if determination of the issue was not necessary for the ultimate conclusion reached.[60] That is not part of the consideration in relation to res judicata.
[60]See Blair v Curran (1939) 62 CLR 464 at 531 – 532 as set out in [75] below.

The Sahins made it clear in their memorandum to the trial court about the pleading amendment that they wished to make to add a deceit claim, that the same facts as those already pleaded were to be relied upon.[61] The loss which they seek to be compensated for in both proceedings is the loss sustained because they were led to believe that the insurance policy would continue in existence although it had been cancelled by the time that Ms Sahin was incapacitated and needed to call on it. It makes no difference that they now wish to add a claim for exemplary/punitive damages – those damages cannot be awarded independently of compensatory damages. Just as it is not possible to bring a second claim to seek more damages than have been awarded initially, it is now not possible to seek additional damages of a different character that are punitive. The relief to which the Sahins were entitled arising out of the conduct of the bank and the insurer (including in relation to the computer records, bank statements and cancellation notice) has been dealt with by the Court of Appeal. The submission made by the Sahins that would distinguish the relief granted from what they say they now seek ignores the fact that they did seek damages in the first proceeding. As the judge noted, the Court of Appeal determined instead to grant restitutionary relief under s 87 of the Trade Practices Act. The Sahins contention that the first proceeding concerned events occurring before they sued whereas the counterclaim concerns subsequent events must also be rejected. The pleadings in each proceeding refer to the same factual matrix. Whilst no allegation of fraud was made in the pleading in the first proceeding in respect of the bank statements, their authenticity was at least considered by the Court as evidence of what information the Sahins had and upon which they relied.
[61]See [21] above.

I would dismiss the appeal on the basis that res judicata applies which prevents the Sahins from pursuing a claim for deceit.

Issue estoppel
(e)Did the judge err in finding that there was an issue estoppel in respect of damages?
(f)Were the findings made by the Court of Appeal in respect of the allegations of fraud conclusive and necessary to support the judgment?
(g)Can there be any issue estoppel when the Sahins were successful in the earlier proceeding and had no ability to appeal from those parts of the Court’s findings in respect of fraud?

Although I have determined that the appeal ought be dismissed on the basis of res judicata, in case I am wrong, I will consider the other grounds of appeal.

In Blair v Curran,[62] Dixon J explained issue estoppel in the following terms:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J. in R. v. Inhabitants of the Township of Hartington Middle Quarter, the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.[63]

[62](1939) 62 CLR 464.

[63]Ibid 531-532.

The Sahins sought to add a ground of appeal that the judge erred in finding that the issue of damages was the subject of an issue estoppel. That application was not opposed and I would grant leave.

The Sahins contend that the judge erred because compensatory and punitive damages were not sought or awarded in the first proceeding. So, they say, damages not having been awarded in the first proceeding there can be no estoppel preventing them from seeking damages in the counterclaim. Moreover, they contended that an award of damages does not form the basis of facts fundamental to a court’s decision; damages are the fruits of a cause of action and therefore they cannot be the subject of an issue estoppel.

They submitted that their failure to specify the nature of the loss in the current proceeding could have been addressed by a request for particulars. Essentially they say that the loss that they claim in the counterclaim is the loss that they have suffered (financially, time, and severe distress) and has been caused by their need to represent themselves in the proceedings and to withstand proceedings for possession because of what they allege is the fraudulent, deceitful conduct of the bank and the insurer.

The bank and the insurer submitted that the issue of damages was conclusively decided in the first proceeding. They say that if the Sahins were entitled to pursue and were successful in a claim for damages for deceit the judgment would be inconsistent with the Court of Appeal judgment.

As the judge observed and I have already noted, in determining the appropriate relief to award to the Sahins, the Court was required to consider whether restitutionary orders under s 87 of the Trade Practices Act should be made or whether damages should be awarded. This must be so even though there is no express discussion of it in the reasons of the Court of Appeal. Further, the Court’s orders setting out the relief that is granted represents the conclusion reached by the Court on that issue. It is final and determinative of the rights of the parties (subject only to appeal).

However, assuming for the purposes of the argument that the cause of action in the first proceeding is a separate cause of action from the deceit claim (which, for the reasons I have given is not the position), it does not necessarily follow that there would be an issue estoppel in respect of damages. The separate causes of action may give rise to distinct damages. Whilst the court would be astute not to award damages twice for the same loss, to the extent of any different loss arising from a separate cause of action, there ought be no barrier to damages being awarded.

The judge did not find that there was any other issue estoppel. However, there was argument on the appeal as to whether there was any issue estoppel in relation to the computer records, bank statements and notice of cancellation. The Sahins say that the issue of the alleged fabrication of the bank statements was not in contention and did not form the basis of a determination in the first proceeding. However, as I have observed previously, the Court did examine the bank statements and they were part of the evidence referred to by Hargrave AJA in his reasons. Although not stated explicitly, I infer that the Court accepted that the bank statements were genuine.

The bank and the insurer submitted that the main factual disputes were essentially decided in favour of the Sahins and founded the judgment entered in their favour. They contended that all of the issues which formed part of the findings made by the Court that misleading and deceptive conduct had been established against the bank and the insurer encompass all of the issues that the Sahins submit are not the subject of issue estoppel; the issue in question was whether the bank fraudulently created bank records and that issue covered the field of alleged fabrication of bank records, including the bank statements.

The Sahins accepted that the issue as to whether the bank’s computer records were created fraudulently was decided in favour of the bank and the insurer. However, they submitted that no estoppel could apply because the findings were not the basis for the ultimate conclusion of the court on the cause of action for misleading and deceptive conduct. Further, they submitted that having succeeded, there was no reason for them to appeal nor could they appeal. They relied on James v The Commonwealth.[64] In that case, Mr James attacked the validity of the Dried Fruits Act 1928-1935 and regulations passed under it on the basis of inconsistency with ss 92 and 99 of the Constitution. He succeeded in respect of the s 99 argument but not on the s 92 point. In later litigation, Mr James again sought to have the Dried Fruits Act and regulations declared invalid on the basis of s 92. The Commonwealth sought to stay the proceeding as vexatious and oppressive on the basis that the question had previously been litigated between the parties. The High Court did not order a stay. Rich J observed that having succeeded in the earlier litigation, Mr James could not appeal. He held that there was no reason why the litigation should not continue.[65] Dixon J explained:

In one sense it is true that the question was decided against him. He submitted the contention to the Court which announced an opinion that he was wrong; but that opinion was not translated into a decree or order and could not be, because upon an independent contention he succeeded. There was no judgment from which he could seek special leave to appeal, none which estopped him.[66]

[64](1935) 52 CLR 570. See also Penn-Texas Corporation v Murat Anstalt (No 2) [1964] 2 QB 647 at 660-661 and Glen Eira City Council v Kingston City Council (2001) 116 LGERA 292 at [23].

[65](1935) 52 CLR 570 at 584-585.

[66]Ibid 590-591. See also Murphy v Abi-Saab (1995) 37 NSWLR 280 at 288; Penn-Texas Corporation v Murat Anstalt (No 2) [1964] 2 QB 647 at 660.

In my view, the same is true in this case in respect of the issue of fraud alleged to arise out of the computer notes, bank statements and cancellation notice and no issue estoppel arises in that regard.

Anshun estoppel
(h)Was the judge in error in concluding that a favourable outcome in the counterclaim would be inconsistent with this Court’s judgment in the first proceeding?
(i)Was the judge in error in finding that it was unreasonable not to raise the deceit claim on the appeal when the Sahins had not been permitted to pursue it at trial, the bank and the insurer had opposed the application to amend and the counterclaim was on foot at the time of the appeal?
(j)Having concluded that if the counterclaim was permitted to proceed there was a real and appreciable risk of an inconsistent determination of rights about the conduct of the bank and the insurer, should the judge have permitted the counterclaim to proceed because there is a likelihood of a finding of fraud and establishment of the claim in deceit?
(k)Should the bank and the insurer have sought a stay of the counterclaim in the Court of Appeal?

Anshun estoppel applies where a matter raised in a second proceeding was so relevant to the subject matter of the first proceeding that it was unreasonable for the party not to have raised it in that earlier proceeding.[67] An important factor to be taken into account in considering this issue is whether conflicting judgments may arise.[68]
[67]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602.
[68]Ibid at 603.

The Sahins contended that there cannot be inconsistent findings between the two proceedings because there is a different legal basis for each proceeding and the relief sought in each proceeding is different. They submitted that if the judge was convinced that the decision in the first proceeding was wrong, then he is at liberty to depart from it and allow the issue to be determined at trial in the normal manner.

Further, the Sahins submitted that it would not have been reasonable for them to have raised the deceit claim on the appeal as they had raised it in the counterclaim. Rather, they submitted that it would have been an abuse of process for them to pursue the deceit claim in the Court of Appeal whilst the counterclaim was on foot.

They also contended that Anshun estoppel cannot apply in circumstances where:

·they were not permitted to bring the claim in the original proceeding at first instance; and
·the bank and the insurer opposed their application to amend the claim to include the tort of deceit.

The Sahins relied on Macquarie Bank Ltd v National MutualLife Association of Australia Ltd.[69] In that case, the trial judge refused an application by Macquarie to amend a pleading to include further claims. Macquarie brought separate proceedings in which it sought to pursue the additional claims. On appeal, the court held that leave to amend ought to have been granted by the trial judge. That finding was sufficient to dispose of the appeal. However, the members of the court went on to consider other matters including whether Anshun estoppel applied in respect of the second proceeding. Powell JA observed that:

…in a case in which a party has sought, but has been refused, leave to raise a matter in the earlier proceedings, it can hardly be said that through negligence, inadvertence or even accident, he has allowed the point to pass by and ought not thereafter be allowed to seek to raise the matter; rather, as it seems to me, the fact that leave was sought but refused, would constitute special circumstances which would require the Court to permit the matter to be raised in the second proceedings.[70]

[69](1996) 40 NSWLR 543.

[70]Ibid at 619. Compare Khan v Mian [1948] AIR (PC) 78 at 146 where it was held by the Privy Council that the failure of an opposed application by a plaintiff to add a claim in a proceeding did not mean that they had not omitted to sue in respect of it.

That case does not assist the Sahins for there it was the decision at first instance from which the estoppel was said to spring. Here, the issue is whether the appeal decision gives rise to any estoppel. It is the failure of the Sahins to raise on the appeal the court’s refusal at first instance to permit the deceit claim to be pursued that is the subject of criticism. The appeal having been brought by them, they could have included a ground directed to this issue. In my view, it was unreasonable for them not to have done so if they wanted to pursue a claim for deceit. That claim is very closely connected with the subject matter of the first proceeding. Evidence as to the same matters would have been required. If a claim for deceit is to be brought against a company (such as the bank and the insurer), that claim would ordinarily be accompanied by a claim for contravention of the statutory provisions relating to misleading and deceptive conduct. If the deceit claim were permitted to proceed, there would be a real risk of inconsistent findings. As discussed above, the Court has already dealt with whether there was any fraud and whether damages ought be awarded. If the deceit claim had any merit, there is a real risk of inconsistency between the two judgments.

The fact that at the time of the appeal, the counterclaim was on foot, does not excuse the Sahins from failing to raise the matter in the Court of Appeal. It would have been open to them to inform the Court that they would not pursue the counterclaim if the deceit claim was to be dealt with as part of the appeal process or remitted to the County Court.

In reaching the conclusion that I have about Anshun estoppel in this case, I have had regard to the fact that the Sahins are not legally qualified and represented themselves throughout the trial and on appeal. However, of itself this does not mean that special circumstances apply such that Anshun estoppel ought not operate.[71] Were there to be a blanket refusal to apply Anshun estoppel where a litigant did not have legal representation, it would put an opposing represented litigant in an intolerable position – subject always to future litigation by the same protagonist unless res judicata or issue estoppel applied. The represented litigant would be unfairly prejudiced. Therefore, whilst the Sahins’ lack of legal representation is something to be taken into account, that is the only matter weighing against the application of Anshun estoppel and, on its own, it is an insufficient reason for permitting them to prosecute the counterclaim.
[71]MZWGJ v Minister for Immigration & Multicultural & Indigenous Affairs [2005] FCA 1501 at [11]; MZWKJ v Minister for Immigration and Multicultural Affairs [2006] FCA 761 at [19]; SZHEW v Minister for Immigration and Citizenship [2009] FCA 783 at [33]; Kong v Minister for Immigration and Citizenship (2011) 199 FCR 375 at [41].

The Sahins sought leave to add a further ground of appeal that the bank and the insurer could have made their stay application in the Court of Appeal as they knew of the facts in the first and second proceeding at the time of the appeal hearing. I would refuse leave to appeal on this ground as it has no prospect of succeeding. The appropriate forum to pursue the stay application was in the trial division – it was not a matter amenable to determination on appeal. Nevertheless, in my opinion, it might have been expected that the bank, as a sophisticated litigant represented as it was by competent counsel and solicitors, would have brought the existence of the counterclaim to the Court’s attention. However, on this appeal, counsel informed the Court that this was not done. At the very least, that is unfortunate. Had the bank through its legal advisers done so, the Court would no doubt have raised the matter with the Sahins to ensure that they were not unfairly disadvantaged by being in ignorance of their rights.

Conclusion

The appeal should be dismissed. The claim for deceit that the Sahins now wish to pursue is the same cause of action that has already been litigated between them and the bank and the insurer.

[2012] VSCA 317

18 DECEMBER 2012 (First Revision 2 May 2013 [32])