Solak v Registrar of Titles (No 2)
[2010] VSC 146
•21 April 2010
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| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
No. 6728 of 2009
| TARIK SOLAK | Plaintiff |
| v | |
| REGISTRAR OF TITLES | Defendant |
| and | |
| KHEIRS FINANCIAL SERVICES PTY LTD (ACN 100 505 324) | Firstnamed Third Party |
| GAMEL KHEIR | Secondnamed Third Party |
| BANK OF WESTERN AUSTRALIA LTD (ACN 050 494 454) | Thirdnamed Third Party |
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JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 March 2010 | |
DATE OF JUDGMENT: | 21 April 2010 | |
CASE MAY BE CITED AS: | Solak v Registrar of Titles (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 146 | |
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ESTOPPEL – Anshun estoppel – Application for summary dismissal on ground of anshun estoppel – Original proceeding concerned fraudulent mortgage – Registrar of Titles was not a party to original proceeding – Whether unreasonable of the Plaintiff to refrain from raising his cause of action against the Registrar in the earlier proceeding – Possibility of conflicting judgments – Relitigation of issues
REAL PROPERTY – Torrens system – Mortgages – Registration of forged instrument – Indefeasibility of title – Entitlement to statutory indemnity – Transfer of Land Act 1958 (Vic) ss 110(1)(b), (c) and 109(3).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M W Wise | Francis Abourizk Lightowlers |
| For the Defendant | Mr I J Hardingham QC with Mr H W Fraser | Victorian Government Solicitors |
HER HONOUR:
The defendant (“the Registrar”) has applied under r 23.01 of the Supreme Court (General Civil Procedure) Rules 2005 for summary dismissal of the proceeding, applying the principles stated in Port of Melbourne Authority v Anshun Pty Ltd.[1] The basis of the application, shortly stated, was that it was unreasonable for the plaintiff to have refrained from raising his cause of action in this proceeding against the Registrar in an earlier proceeding in which he had sued the thirdnamed third party (“Bank West”).
[1](1981) 147 CLR 589.
A. The earlier proceeding
In 2006, a person purporting to be the plaintiff fraudulently obtained loan funds from Bank West by forging the plaintiff’s signature on a loan agreement and a mortgage document that Bank West registered on the title to the plaintiff’s property. In 2008, the plaintiff instituted proceedings against Bank West seeking declarations to the effect that, by reason of the fraud, the loan agreement and mortgage were void and of no effect, that no amount of money was secured by the mortgage and seeking an order for the discharge of the mortgage. Bank West did not challenge the plaintiff’s claim that his signature had been forged. Rather Bank West defended the proceeding on the basis that the doctrine of indefeasibility effected by the provisions of the Transfer of Land Act 1958 (Vic) (“the TLA”) entitled it to maintain the registration and to enforce the covenant to pay the monies secured by the mortgage. Bank West made a third party claim against Aussie Homes Loans Limited and AHL Investments Pty Ltd (collectively “Aussie”), relying on the terms of a contract pursuant to which Aussie had submitted the loan application to Bank West on behalf of the person purporting to be the plaintiff. Bank West claimed that Aussie was liable under the terms of that contract to indemnify it for its loss, if the mortgage was held to be unenforceable as against the plaintiff. Aussie made a fourth party claim against Kheirs Financial Services Pty Ltd and Gamel Kheir (collectively “Kheirs”) to whom Aussie had contracted the facilitation and processing of the loan application, for contribution for Bank West’s loss. All claims were heard together. On 17 March 2009 Pagone J handed down judgment.[2] The trial judge held that the mortgage was effective as security and dismissed the plaintiff’s claim against Bank West. In consequence, His Honour also dismissed the third and fourth party proceedings, but made findings on apportionment of liability as between Bank West, Aussie and Kheirs “in case it becomes relevant hereafter”.[3]
[2]Solak v Bank of Western Australia Ltd [2009] VSC 82 (Unreported, Pagone J, 17 March 2009).
[3]Ibid [18].
B. This proceeding
The plaintiff then commenced this proceeding against the Registrar. The cause of action is based on s 110 of the TLA which gives a person the statutory right to recover damages from the Registrar for any loss or damage that the person sustains by reason of an amendment of the Register[4] and/or any error, omission or misdescription in the Register.[5] In the Statement of Claim the plaintiff alleged, as against the Registrar:
[4]Transfer of Land Act 1958 (Vic) s 110(1)(b).
[5]Transfer of Land Act 1958 (Vic) s 110(1)(c).
(a) the “truth and [ ] fact”[6] of the forgery of the loan agreement and mortgage;[7]
[6]Statement of Claim filed 21 May 2009 [3].
[7]Statement of Claim filed 21 May 2009 [3].
(b) that he did not receive any of the proceeds of the loan;[8]
[8]Statement of Claim filed 21 May 2009 [6].
(c) that he had sued Bank West in the earlier proceeding for declarations that the loan was void, that no amount of money was secured by the mortgage and for consequential relief requiring the bank to provide a discharge of the mortgage;[9]
[9]Statement of Claim filed 21 May 2009 [7].
(d) that his claims had been dismissed by Pagone J given on 26 March 2009;[10] and
[10]Statement of Claim filed 21 May 2009 [8].
(e) that “in the premises, at law”:
· he is bound to repay the loan to Bank West; and
· the registered mortgage over his property secured repayment of the loan.[11]
He has further claimed that “in the premises” he is a person who has suffered loss or damage for the purposes of s 110(1) of the TLA[12] and that he is entitled to be indemnified by the Registrar for his loss or damage and to bring this action against the Registrar for recovery of damages pursuant to s 110(2) of the TLA.[13]
[11]Statement of Claim filed 21 May 2009 [9].
[12]Statement of Claim filed 21 May 2009 [10].
[13]Statement of Claim filed 21 May 2009 [11].
The Registrar filed a defence in which he alleged, amongst other matters, that he was not bound by the judgment and orders of Pagone J as he was not a party to that proceeding and that:
(a) the instrument of mortgage was void and did not secure the payment of any monies to Bank West;
(b) the mortgage is unenforceable by reason of the Consumer Credit (Vic) Code; and
(d) that the plaintiff is estopped from making his claim against the Registrar on the Anshun principle.[14]
[14]Further Amended Defence filed October 2009 [6]-[9], [11], [13A].
The Registrar also joined Kheirs and Bank West as third parties. In the Third Party Statement of Claim the Registrar alleged that if the plaintiff, at the trial, establishes the forgery and his entitlement to be indemnified by the Registrar under s 110 of the TLA, then the Registrar has the statutory right pursuant to s 109(3) of the TLA to recover the amount paid in satisfaction of the indemnification from Kheirs and Bank West by reason that they were the persons “actually responsible” for the plaintiff’s loss and damage.
Subsequently the Registrar sought the leave of the Court to amend his Defence and his Third Party Claim to raise other allegations, including:
(a) the allegation that the loan agreement as well as the instrument of mortgage was void; and
(b) the allegation that the registered mortgage, properly construed, did not secure the payment of any monies to Bank West –
and to seek declarations in the third party claim as against Bank West that:
(d) the mortgage did not secure the obligation created under the loan agreement;
(e) registration of the mortgage was void as against the plaintiff; and
(f) as a consequence of the operation of the Consumer Credit (Vic) Code, the mortgage is unenforceable by Bank West against the plaintiff.
The applications for leave were opposed by the other parties. Bank West’s opposition included the contention that the proposed amendments involved the litigation of matters already decided on by the trial judge in the earlier proceeding and that the principle of res judicata applied to prevent the Registrar from agitating those claims. In a judgment published on 21 December 2009,[15] I held that it was not open to the Registrar in these proceedings to litigate the matters decided on by the trial judge in the earlier proceeding and that the issue about the proper construction of the mortgage and whether it was effective as security for the monies advanced under the loan agreement had been conclusively determined as between Mr Solak and Bank West by the trial judge in the earlier proceeding and that although the Registrar was not a party to that litigation, that he must accept the findings in the earlier proceeding. Accordingly I would not allow the amendments in so far as they went to the matters decided upon by the trial judge. This included the declarations sought against Bank West that the mortgage did not secure the obligation created under the loan agreement and that the registration of the mortgage was void as against the plaintiff. I allowed the Registrar to seek the declaration that the mortgage was unenforceable by Bank West as a consequence of the operation of the Consumer Credit (Vic) Code as that issue had not been raised in the earlier proceeding.
[15]Solak v Registrar of Titles [2009] VSC 614 (unreported, Davies J, 21 December 2009).
C. Principles of Anshun estoppel
An Anshun estoppel will arise in circumstances where a party to a subsequent proceeding seeks to litigate a claim or defence “which could and should have been litigated in the earlier proceedings” (underlining added).[16] The estoppel is “analogical extension” of the doctrines of res judicata and issue estoppel[17] and operates to preclude a litigant from bringing a particular claim where it was “unreasonable” for the litigant not to have brought that claim, or rely on that claim as a defence, in an earlier concluded proceeding.[18] If the litigant was unable to raise the claim or defence in the earlier proceeding, no Anshun estoppel will arise.[19] Equally so the fact that the litigant could have raised the claim or defence in the earlier proceeding does not mean that the estoppel will arise. The test is “based on the reasonableness … of the conduct of a litigant in earlier proceedings”.[20] The mere fact that the matter could have been raised does not mean that it should have been raised for the operation of the estoppel.[21] The “unreasonableness” criterion involves an evaluative element based upon what a litigant could reasonably have been expected to do in the earlier proceeding. In Port of Melbourne Authority v Anshun Pty Ltd, the majority Mason and Aickin JJ stated:
there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding.[22]
Although the estoppel was expressed in reference to the failure to raise a defence, the principle equally applies with respect to a claim. The question is whether the claim was “so relevant” to the earlier litigation that it was “unreasonable” not to have raised it.[23]
[16]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 598.
[17]Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 (Unreported, French J, 20 December 2004) [59]; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33 (Unreported, Alssop P, Giles, Handley JA, 16 March 2010) [39].
[18]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602.
[19]Spassked Pty Ltd v Commissioner of Taxation [2007] FCAFC 205 (Spender, Dowsett, Edmonds JJ, 21 December 2007) [78].
[20]Meriton Apartments Pty td v Industrial Court of New South Wales [2009] NSWCA 434, [60] cited with approval in Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, [39].
[21]Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, [4]; Aon Risk Servies Pty Ltd v Australia National University (2009) 239 CLR 175, 193-5 (French CJ).
[22]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602.
[23]Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, [4].
Whether a claim was “so relevant” to the earlier litigation that it was “unreasonable” not to have raised it falls to be considered on a case by case basis.
This requires consideration of all the circumstances bearing upon unreasonableness in the particular matter, not simply identifying common facts in, or subject matter of, both proceedings.[24] In Anshun, Gibbs CJ, Mason and Aickin JJ explained that:
[24]Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, [52].
there are a variety of circumstances … why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.[25]
[25]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 603.
Circumstances bearing on “unreasonableness” include, but are not confined to[26], the potential for the judgment in the later proceeding to “conflict”[27] with the judgment in the earlier proceeding. Gibbs CJ, Mason and Aickin JJ in Anshun explained:
By “conflicting” judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that hey appear to declare rights which are inconsistent in respect to the same transaction.[28]
Thus the estoppel may apply where the subject matter of the later proceeding is so closely connected with the subject matter of the earlier proceeding that there may be an inconsistent determination of rights in respect to the same transaction, although there is not precise correspondence between the legal claims.[29]
[26]Gibbs v Kinna (1999) 2 VR 19, [28] (Kenny JA)
[27]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
[28]Ibid 603-4.
[29]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 603-4; Gibbs v Kinna [1999] 2 VR 19, 27 (Kenny JA); Trawl Industries of Australia Pty Ltd (recrs and mgrs apptd)(in liq) v Effem Foods Pty Ltd (1992) 108 ALR 335, 352 (Gummow J); HIH Claims Support Limited v Insurance Australia Limited [2009] VSC 434, (Unreported, Hollingworth J, 1 October 2009) [34].
Anshun estoppel can apply even though the subsequent action is against a party that was not a party to the earlier action[30] as the consideration that underlies the estoppel, as with res judicata and issue estoppel, is the “general public interest in the same issue not being litigated over again”.[31] Justice Handley, writing extra-curially, explained:
The extended res judicata doctrine applied in Anshun is based on the court’s inherent jurisdiction to prevent abuse of its process by proceedings which are vexatious, that is unreasonable. It is not necessary for this purpose to establish identity of parties or privity. A good example is Hunter v Chief Constable where civil proceedings for assault brought by members of the Birmingham Six against police officers were dismissed as an abuse of process because they sought to relitigate issues decided against them in the criminal trial. Needless to say the police officers were not parties to the criminal proceedings.[32] (references omitted)
The doctrines of res judicata, issue estoppel and Anshun estoppel “can be regarded as serving a public policy which protects against abuse of process by supporting the finality of judicial dispositions of particular controversies”.[33]
[30]Spencer Bower and Handley, Res Judicata (4th ed, 2009) 316 [26.14]: ”the doctrine can apply where the Claimant or the defendant or both are different”.
[31]Arthur JS Hall & Co v Simons (2000) 3 WLR 543, 572 (Lord Hoffman).
[32]‘Res judicata: general principles and recent developments’ (1999) 18 Australian Bar Review 219.
[33]Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 (Unreported, French J, 20 December 2004) [64].
Thus in Rippon v Chilcotin Pty Ltd[34] the New South Wales Court of Appeal held that the proceedings were an abuse of process because the plaintiff was attempting to litigate or relitigate issues that had been determined in an earlier proceeding against persons who were not parties to that earlier proceeding. Although the Anshun principle was not relied on to support the application to have the proceeding dismissed as an abuse of process, Handley JA (with whom Mason P and Heydon JA agreed) stated that:
[34](2001) 53 NSWLR 198.
[I]t could fairly have been said, in the language of the joint judgment in Port of Melbourne Authority v Anshun (at 602), that the claims against the accountants were so relevant to the subject matter of the first action that it was unreasonable for the purchasers not to rely upon them in that action: compare Morris v Wentworth-Stanley (1999) QB 1004 at 1011, 1017.[35]
The guiding consideration where an action is commenced against a party that was not a party to the earlier action is whether there is such a close connection between the actions, albeit against different defendants, that it would be expected that the claims would all be dealt with in the one proceeding, thereby avoiding multiplicity of legal proceedings and the possibility of conflicting or inconsistent judgments.[36]
D. Application of the principles
[35]Ibid [23].
[36]See also Redowood Pty Ltd v ASX-Perpetual Registrars Limited (2006) 57 ACSR 256; Asher v Secretary of State for the Environment [1974] CH 208; Hunter v Chief Constable of the West Midlands Police [1982] AC 529; Cleary v Jeans (2006) 65 NSWLR 355.
(i) Claim could have been made against the Registrar in the earlier proceeding
It was argued for the plaintiff that it was “not clear” that the claim against the Registrar based on s 110 of the TLA could have been raised in the earlier proceeding. The submission was that the entitlement to indemnity depended on whether the plaintiff had sustained any loss by reason of the registration of the forged mortgage and that depended on whether the plaintiff was entitled to the declaratory relief that he sought in the earlier proceeding.
In my view, there is no doubt that the claim against the Registrar based on s 110 of the TLA could have been raised as the facts constituting the cause of action occurred upon the registration of the forged mortgage. The foundation for the claim was there. It was not necessary in my view for the plaintiff to establish the legal consequences that flowed from the registration in a separate and earlier proceeding in order to found the claim.[37]
[37]Vassos v State Bank of South Australia [1993] 2 VR 316.
(ii) Claim should have been made against the Registrar in the earlier proceeding.
It was submitted for the plaintiff that it was reasonable for the plaintiff not to have brought his claim under s 110 of the TLA against the Registrar in the earlier proceeding based on the following matters:
(a) in the course of the hearing in the earlier proceeding Pagone J had queried whether the Registrar should be joined as a party to that proceeding and senior counsel for the plaintiff had expressed his view that the plaintiff had not suffered a loss unless he was unable to obtain the removal of the mortgage from the title and that this needed to be established before the plaintiff sought relief against the Registrar under s 110 of the TLA.[38] It was submitted that the plaintiff reasonably regarded the decision in the first proceeding to be a necessary precondition to the cause of action in this proceeding as the Court’s determination of the rights inter se between the plaintiff and Bank West on the enforceability of the mortgage as security for the loan obligation decided whether the plaintiff’s claim against the Registrar could be sustained;
[38]See transcript of proceeding Solak v Bank of Western Australia Ltd [2009] VSC 82 (Unreported, Pagone J, 17 March 2009) 25-26; transcript in this proceeding on 1 March 2010, 32.
(b) it was submitted that taking action against the Registrar in the earlier proceeding without first establishing whether the mortgage was enforceable against the plaintiff would have placed the plaintiff in jeopardy of a costs order under section 110(5) of the TLA because “it was entirely possible or likely” that the Registrar would defend the claim on the basis that it was premature, as he had done in Vassos v State Bank of South Australia[39] or because he would succeed in obtaining the declaratory relief that he sought against Bank West;
(c) it was submitted that the plaintiff does not seek any finding or result in this proceeding as against the Registrar that would be inconsistent with, or in conflict with, the findings of Pagone J in the earlier proceeding because this cause of action is predicated on the plaintiff being bound by the adverse finding in the earlier proceeding that the mortgage is enforceable as against him;
(d) finally it was submitted that the possibility of inconsistent judgments did not arise on the allegations in the defence that have not been struck out, even though they include the allegation that the mortgage is unenforceable by reason of the Consumer Credit (Vic) Code. It was submitted that the Registrar had to satisfy the Court, in order to make good the Anshun estoppel, that the defence based on this allegation is an “unarguably good point” that would have made a difference to the outcome in the earlier proceeding, if argued there. It was argued that there is no possibility of inconsistent judgments because that claim is bad in law and not capable of success.
[39][1993] 2 VR 316.
For the Registrar it was submitted that it was unreasonable of the plaintiff not to join the Registrar as a party to the earlier proceeding so that all issues going to the extent of loss or damage sustained by the plaintiff could be fully and finally heard and determined in the one proceeding. It was submitted in particular that:
(a) the Registrar is bound by the judgment of Pagone J determining the mortgage construction point in favour of Bank West, on which his liability under s 110 of the TLA is premised by the plaintiff, in circumstances where he was not given the opportunity to be heard;
(b) judgment in favour of the Registrar on his claim that the mortgage is unenforceable as a consequence of the operation of the Consumer Credit (Vic) Code would conflict with the judgment of the trial judge in the earlier proceeding in that the judgment would declare rights as between the plaintiff and Bank West with respect to the enforceability of the mortgage that are inconsistent with the rights declared by the trial judge;
(c) the third parties to this proceeding were parties to the earlier proceeding and had their relative culpability determined by the trial judge, albeit in obiter. Those same parties have to be before the Court again in this proceeding where the same question effectively will be re-agitated by reason of the nature of the claim made against them: viz, as the party “actually responsible” for the plaintiff’s loss and damage.
In my view, the Anshun estoppel defence is well founded. In my view, the claim against the Registrar under s 110 of the TLA was so relevant to the subject matter of the earlier proceeding that it was unreasonable for the plaintiff not to have sought relief against the Registrar in that proceeding.
The close relationship of subject matter in both proceedings is readily apparent from the nature of the case pleaded by the plaintiff against the Registrar. The plaintiff expressly relies on the judgment in the earlier proceeding for the action he has brought against the Registrar to set up his claim that he has suffered loss and damage occasioned by registration of the forged mortgage. This proceeding is premised on the earlier proceeding establishing that the mortgage is effective as security for the repayment of the loan and that the plaintiff has a statutory entitlement to indemnification. The plaintiff’s claim in this proceeding is intimately connected with the earlier proceeding.
The close relationship of subject matter can be demonstrated in a another way, although this was not argued before me. The plaintiff has appealed decision of Pagone J. If successful the very action on which he sues the Registrar in this proceeding falls away. This proceeding is predicated on a right that the Court of Appeal may contradict by allowing the appeal.
Moreover, the Registrar has had his rights affected by the litigation in the earlier proceeding because it is now not open to the Registrar in this proceeding to contend that the mortgage, on its proper construction, did not secure repayment of the loan agreement. That has been decided and in a manner that sets up the liability of the Registrar under s 110 of the TLA. The plaintiff’s conduct in not joining the Registrar in the earlier proceeding has deprived the Registrar of the opportunity of presenting his defences fully. In my view it was unreasonable for the plaintiff not to join the Registrar as a party to the earlier proceeding so that the Registrar could have been heard on the very central issue that went to providing the basis of the claim as against the Registrar. This is sufficient reason, in my view, for the Anshun estoppel to apply in this case. It was to be expected that the plaintiff would rely on an adverse decision by the trial judge to constitute the basis for recovery against the Registrar. The fact that the plaintiff could only succeed against the Registrar if he was unsuccessful against Bank West does not derogate from that conclusion. Nor does the fact that the plaintiff’s senior counsel in the earlier proceeding took the view that the enforceability of the mortgage should be established before the plaintiff proceeded against the Registrar. There are many forensic and other considerations specific to the party that can govern the conduct of a case and justify, as was the case here, why a party may decide not to litigate all matters in the one proceeding. This was recognised by the High Court in Anshun.[40] But those considerations do not override the application of the Anshun principle. The Anshun principle is about the conduct of litigation as between litigants, not about the forensic and other considerations governing the decision to refrain from litigating all matters in the one proceeding.
[40]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 602-3.
There are other considerations that reinforce the unreasonableness of the plaintiff’s conduct in the Anshun sense.
I do not accept that the risks of a costs order made it “reasonable” in this case as between the plaintiff and the Registrar for the plaintiff not to join the Registrar. It may be accepted that the joinder of the Registrar in the earlier proceeding placed the plaintiff at the risk of exposure to a costs order, but that is a risk of any litigation. It does not make the plaintiff’s conduct “reasonable” in relation to the Registrar’s position. In the circumstance that the plaintiff sought to use the earlier judgment to found his cause of action against the Registrar, the Registrar should have been joined as a party to that earlier proceeding.
Had the Registrar been joined, the Registrar would have had the opportunity to put all his defences and all issues would have been determined in the one proceeding, avoiding the potential for conflicting judgments on the enforceability of the mortgage. It is not to the point that the plaintiff does not seek any finding or result in this proceeding as against the Registrar that would be inconsistent with, or in conflict with, the findings of the trial judge in the earlier proceeding as it is the allegation in the defence based on the Consumer Credit (Vic) Code that gives rise to the possibility of conflicting judgments. However, I reject the submission that this allegation is bad in law and not capable of success. The argument before the Court on the Consumer Credit (Vic) Code was sufficient in itself to highlight that the point raises difficult questions of law and fact in this case that require adjudication by the Court to resolve.
Had the Registrar been joined, it was to be expected that the Registrar may join Bank West and Kheirs as third parties in the circumstances where the TLA makes provision for the Registrar to recoup any amount paid out by way of indemnity to the plaintiff from “the person actually responsible … as a debt by action in the name of the Registrar”.[41] That claim was relevant to, and closely connected with, the subject matter of the earlier litigation because the third and fourth party claims in the earlier proceeding raised the very same issue, albeit framed as different causes of action: viz, which of the parties should bear the ultimate loss occasioned by the forgery. The controversy in this proceeding, as a matter of substance, is essentially the same as the controversy in the first proceeding. The third and fourth party claims were argued fully before the trial judge in the earlier proceeding. The trial judge made findings and conclusions on apportionment of liability “in case it becomes relevant hereafter”. For that purpose His Honour considered the evidence before him of the role of Bank West, Aussie and Kheirs in relation to the creation of the loan agreement and mortgage and the approval and registration of the mortgage. The trial judge made findings about which of Bank West, Kheirs and Aussie should bear the liability. His Honour found as follows:
The task in apportioning liability amongst concurrent wrongdoers is to be undertaken in a real and pragmatic sense to identify who is to blame for the loss and who should bear the liability. The primary focus in that undertaking is to determine, as best as may be possible, the “causal potency” of the various factors which singularly or together went to bring about the loss caused. In my view the conduct of Mr Kheir was the primary cause of the loss as between him, Aussie and Bank West. He had contractual and statutory obligations to identify the person claiming to be Mr Solak. He was the person best placed to verify identity and, because of that fact, was the person upon whom the obligation was placed by contractual agreement and emphasised as such in the training provided to him by Aussie. He was not told by Mr Gillespie that identification was not necessary and did not make any attempt either to secure the original documents (which of course was unlikely given the nature of the documents) or to ask Mr Gillespie what should be done, not about the form to be conveyed by fax as a remote application, but rather about the documents relevant to identification of the person seeking the funds. He did not state on the form anything that might have put Bank West on notice that a vital element for completion of the transaction (namely, identification of the applicant) had not been completed by him. Page 13 of the 42 page fax he sent to Bank West referred to his conversation with Mr Gillespie but only to state that Mr Gillespie had “acknowledged suitability of product sought”. Nothing was said anywhere in the information conveyed by Mr Kheir about the lack by him of sighting of identification documents. A person reading the “100 point signature identification form” on page 10 of the 42 page fax he sent to Bank West, might conclude that it had been defectively completed but that he had in fact sighted the documents. Had he not done so it was incumbent upon him to make that clear, not to complete any part of the form, and to indicate as the results of his check that verification had not been achieved.
His position as the person with primary contact to the applicant made others substantially reliant upon him. The contractual obligations imposed upon him by Aussie, and indirectly by Bank West, reflected the reality of the situation that he was the person in primary contact with the customer. The outsourcing effected by the various arrangements between Bank West, Aussie and Kheir Financial Services, to their mutual financial profit and interest, placed the primary burden upon Mr Kheir to ensure the identity of the person with whom they would in turn contract and deal. In fact his dealing with the person purporting to be Mr Solak was careless in many respects. In addition to those I have already mentioned, I should mention some others. Mr Kheir originally received from the person purporting to be Mr Solak only the signed pages of the loan application documents and could not have known for certain what other information that person was declaring to be true and correct. Mr Kheir first received tax returns that had not been signed by the forger and subsequently received the signed pages (which had previously not been signed), but obviously backdated, by the person he thought was Mr Solak. He also received faxes from the person purporting to be Mr Solak from different post office fax machines rather than the one to which Mr Kheir had sent faxes to him. None of these matters were pursued in any way by Mr Kheir.
The position of Bank West is not free from causative loss. Mr Gillespie may only have been asked about the processing of applications remotely between Melbourne and Sydney but he did not turn his mind to the important task of how identification of the customer would be made. Accepting that Mr Gillespie would have said that the customer should attend a Melbourne branch if he had been asked, does not carry with it (and I do not find) that he was asked or that he did say to Mr Kheir that the customer should attend a branch for identification. I have no doubt that if Mr Gillespie had said that to Mr Kheir that Mr Kheir would, in turn, have said that to the person purporting to be Mr Solak. In other words, I find that Mr Gillespie did not seriously turn his mind to all of the ramifications of a remote application when asked by Mr Kheir about what to do. Mr Gillespie should have done so. Furthermore, Bank West subsequently received and accepted forms which were defective on their face and had insufficient internal processes to ensure that the fraud was not prevented either by a thorough dealing with the forms provided by the broker or at the subsequent stages of the opening of accounts and the payment of cheques from them.
Aussie’s contribution to the ultimate loss is insignificant in this case. Its system was essentially to act as intermediary between the broker and the banker. It did have a training system and, in my view, was entitled to rely upon the systems in place which ought to have avoided the fraud. Mr Kheir’s counsel also suggested that some culpability was to be borne by Gadens as Bank West’s solicitors for not detecting the fraud, and possibly the ANZ Bank (as the collecting bank for the cheques) for not having verified the signatures upon presentation of cheques. In my view neither have been shown reliably responsible for any part of the loss. In no way could either be said to be causative of the loss beyond their participation in a series of transactions which might, at best hypothetically, have enabled either to intervene if something had appeared to be irregular. Neither was joined as a party and none of the hypothetical wrongdoing of the ANZ or Gadens was reliably explored or tested.
In my view the apportionment as between Mr Kheir (including Kheir Financial Services), Bank West and Aussie should be 70%, 30% and 0%.[42] (references omitted)
[41]Transfer of Land Act 1958 (Vic) s 109(3).
[42]Solak v Bank of Western Australia Ltd [2009] VSC 82 (Unreported, Pagone J, 17 March 2009) [38]–[42].
In this proceeding the Registrar’s claim under s 109(3) of the TLA against the third parties concerns the same subject matter as the third and fourth party claims in the earlier proceeding and involves the same parties, apart from Aussie, which has not been sued, presumably on the basis that Pagone J attributed no liability to Aussie. Had the Registrar been joined to the earlier proceeding, re-agitation of matters already decided, albeit obiter, would have been avoided, removing any prospect of the Court in this proceeding deciding differently to Pagone J on the question of which party should bear responsibility for the plaintiff’s loss or damage.
More particularly, the Court of Appeal is seized of the jurisdiction to determine the matter in the appeal,[43] thus raising the potential for the Court of Appeal to give a judgment that conflicts with a judgment of the Court in this proceeding or vice versa.
[43]Supreme Court (general Civil Procedure) Rules 2005 r 64.22(2); Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1
For the above reasons, the conduct in refraining from joining the Registrar as a party to the earlier proceeding was unreasonable in the Anshun sense and the circumstances warrant the application of the Anshun principle.
I will order the summary dismissal of the proceeding and will hear the parties on the questions of costs.
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