Andrews v Australia and New Zealand Banking Group Ltd

NOTICE OF MOTION 18 By a Notice of Motion filed on 22 February 2011, the Applicants seek two orders. First, an order pursuant to O 11 r 16 of the Federal Court Rules (FCR) and/or s 37P and/or s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the FCA) that paragraph 55(c)(ii) of ANZ's AFTR be struck out on the basis that it discloses no reasonable defence or allegation relevant to paragraph 52 of the Applicants' AFTS. 19 Secondly, the Applicants seek an order pursuant to ss 33Z(1), 33ZF(1) and 37P(2) of the FCA and, further or alternatively, O 29 r 2 of the FCR, that the Court determine identified questions separately and before any other issue in the proceedings. On the morning of the hearing, the Applicants handed up identified questions which were substantively different to those attached to the Motion. The separate questions now sought by the Applicants were identified as: 1. In respect of each of the Exception Fees, are the amounts payable upon breach, so as to be capable of amounting to a penalty? 2. In respect of each of the Exception Fees, are the amounts otherwise payable on the occurrence of an event within the area of obligation of the customer, such that they are capable of amounting to a penalty? 20 I will deal with each application in turn.

A. APPLICATION to STRIKE OUT 21 As noted, the application to strike out paragraph 55(c)(ii) of the AFTR is made under O 11 r 16 of the FCR and/or ss 37P and/or 33ZF of the FCA.

Order 11 r 16 of the FCR 22 Order 11 r 16 of the FCR provides that: Where a pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or (c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out. 23 An order to strike out a pleading will "only be made in a plain and obvious case": Davis v Commonwealth of Australia (1986) 68 ALR 18 at 23 and the authorities cited. It is a discretionary power to be exercised with caution: Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164. As Finkelstein J stated in Imobilari Pty Ltd (ACN 091 464 729) v Opes Prime Stockbroking Ltd (in liq) (recs and mgrs apptd) (ACN 086 294 028) (2008) 252 ALR 41 said (at [4] - [5]): The fundamental thing to understand about the strike-out rule, which the language of O 11 r 16 itself makes clear, is that the rule is concerned only with the adequacy of the pleading (or to be more precise, the allegations and the causes of action asserted therein) as a matter of law. The rule does not permit or allow consideration of facts or evidence outside the pleadings: Dey v Victorian Railways Cmrs (1949) 78 CLR 62 at 91 and 109 … see also General Steel Industries Inc v Cmr for Railways (NSW) (1964) 112 CLR 125 at 129 … Indeed, as counsel for ANZ, Mr Archibald QC, correctly noted in his submissions, the court must, for purposes of deciding the strike-out motion and deciding whether a pleading discloses a reasonable cause of action, assume the truth of the allegations in the statement of claim and draw all inferences in favour of the non-moving party because the question is whether those allegations, even if proved, cannot succeed as a matter of law: General Steel at CLR 129. The United States Supreme Court recently reexamined the standard for a strike-out motion (called a motion to dismiss in the US) in Bell-Atlantic Corp v Twombly 550 US 544 (2007) ... The Supreme Court reaffirmed that on a strike-out motion the court is required to assume the truth of all allegations. Proceeding on that assumption, the Supreme Court held the only question is whether the allegations are enough to raise the applicant's right to relief above the speculative level. That is, the allegations must be plausible enough to create a reasonable expectation that discovery will reveal evidence to support the claim. This plausibility test is consistent with the strike-out test expressed by the High Court in General Steel, where Barwick CJ said (at CLR 129): The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense"… At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance". (Emphasis added.) Consistent with that view, the Court will not usually decide a difficult question of law on a strike-out application unless resolution of the question of law will bring the proceedings to an end or else substantially reduce the scope of the trial: Traderight (NSW) Pty Ltd and Ors v Bank of Queensland Ltd [2008] NSWSC 543 and Williams and Humbert Ltd v W&H Trademarks (Jersey) Ltd [1986] AC 386, at 435-6. 24 Opinions have been expressed that some revision of the principles may be necessary in light of the ever increasing complexity of modern commercial litigation: cf AWA Limited v Daniels (unreported, Supreme Court of New South Wales, Rogers CJ Comm D, 8 October 1992,) and Re Elders Australia Ltd; Super John Pty Ltd & Ors v Futuris Rural Pty Ltd (No 2) [1997] FCA 1501. In my view, the principles have, at least to some extent, already been modified. That last statement requires explanation. 25 In 1993, the High Court reaffirmed the principles applicable to a strike out application without qualification: cf Webster v Lampard (1993) 177 CLR 598. Sixteen years later, the High Court expressed what must be described as the pragmatic modern view of litigation (albeit in the context of an amendment application): a view which proceeds from a number of fundamental premises. First, that case management is an essential and accepted aspect of our civil justice system: AON Risk Services Limited v Australian National University (2009) 239 CLR 175 at [92]. Secondly, the civil litigation rules no longer are considered as directed only to the resolution of the dispute between the parties to the proceeding: AON at [93]. Thirdly, that conduct of litigation is not merely a matter for the parties but also one for the Courts: AON at [93]. Fourthly, case management requires account to be taken of other litigants, not just the parties to the proceedings. 26 Of course "case management principles should not supplant the objective of doing justice between the parties according to law": AON at [29], [30] and [57]. However, the High Court stated that "waste of public resources and undue delay, with the concomitant strain and uncertainty imposed on litigants", together with the potential for loss of public confidence in the legal system, were factors able to be taken into account in the exercise of interlocutory discretions: AON at [30] and at [57]. The analysis of the plurality in AON is instructive. Their Honours (at [57], [94] and [95]) refer to The State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 at 154, where after referring the Court's previous decision in Sali v SPC Ltd (1993) 67 ALJR 841, the plurality in JL Holdings dealt with case management principles as follows: … nothing in that case suggests that those principles might be employed, except perhaps in extreme circumstances, to shut a party out from litigating an issue which is fairly arguable. Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim. (Emphasis added.) 27 The High Court in AON then went further - their Honours acknowledged that it may be necessary in an appropriate case to make a decision which may produce a sense of injustice, for the sake of doing justice to the opponent or to other litigants: AON at [94]. Such an approach is consistent with the direction in s 37M(3) of the FCA that the Rules must be interpreted and applied, and any power conferred must be exercised or carried out, in a way that best promotes the overarching purpose - the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: see s 37M of the FCA and AON at [97] - [98]. 28 Put another way, "courts have an inherent power to prevent misuse of their procedures in a way, which although not inconsistent with a literal applications of the Rules, would nevertheless be unfair to a party to the litigation 'or would otherwise being the administration of justice into disrepute among right-thinking people'": AON at [33] and the authorities cited.

Apply to Fast Track? 29 Before turning to consider O 11 r 16 of the FCR, it is first necessary to enquire whether O 11 r 16 of the FCR which refers to "pleadings" applies to proceedings filed in Fast Track. ANZ did not contend that O 11 r 16 of the FCR was inapplicable. 30 "Pleading" is defined in O 1 r 4 of the FCR as including "a statement of claim and a cross-claim to which Order 5 applies and subsequent pleadings, but does not include an application, notice of motion or affidavit". The definition is not exhaustive. That is not surprising. The mere labelling of a document as a "pleading" (or a particular type of pleading) will never be sufficient to ensure that a document is a pleading. More is required. Similarly, the fact that a document is not called, for example, a "statement of claim" does not preclude the operation of O 11 of the FCR. 31 The purpose of a pleading is to clearly define the issues to be tried, and to allow the other party an opportunity to know the case against them: Betfair Pty Limited v Racing New South Wales [2010] FCAFC 133 at [49] - [52]; Gould, Birbeck and Bacon v Mount Oxide Mines Limited. (In liquidation) (1916) 22 CLR 490, 517 and Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd (2008) 69 ACSR 1 at [68]. That has been the role and purpose of pleadings at least since the Supreme Court of Judicature Act 1875 (UK): see AON at [10] - [13]. 32 The Federal Court Practice Note "CM 8 - Fast Track" (CM 8) sets out the arrangements for the management of proceedings filed in Fast Track: cl 1.2 of Pt 1. Part 4 of CM 8 entitled "Fast Track Statements, Responses and Cross-Claims" addresses the fact that pleadings are replaced by Fast Track Statements, Responses and Cross-Claims (together, Fast Track documents) as follows: No pleadings unless Court otherwise orders 4.1 Unless the Court otherwise orders, there will be no pleadings in a proceeding to be conducted in accordance with the Fast Track Directions. Instead, the parties will use Fast Track Statements, Fast Track Responses, Fast Track Cross-Claims and Fast Track Replies. 33 That statement must be read in context. Clauses 4.2 and 4.3 provide: Fast Track Statement 4.2 The applicant in a proceeding to be conducted in accordance with the Fast Track Directions must file and serve a 'Fast Track Statement' in accordance with the form set out in the annexure to this Practice Note. The document must, avoiding undue formality, state in summary form: (a) the nature of the dispute; (b) the issues that the applicant believes are likely to arise in the proceeding; (c) the applicant's contentions, including the material facts upon which the applicant intends to rely (which must be stated with adequate particulars), the relief claimed and the legal grounds for that relief. Fast Track Response 4.3 The respondent in a proceeding to be conducted in accordance with the Fast Track Directions must file and serve a 'Fast Track Response' in accordance with the form set out in the annexure to this Practice Note. The document must, avoiding undue formality, state in summary form: (a) the nature of the dispute; (b) the issues that are likely to arise in the proceeding; (c) the respondent's response to each of the applicant's contentions including: (i) the material facts upon which the respondent intends to rely, insofar as they are not included in the 'Fast Track Statement'; (ii) a reference to whether the respondent admits, does not admit or denies each allegation made by the applicant; and (iii) the legal grounds for opposing the relief claimed by the applicant. 34 The Annexure to CM 8 requires a Fast Track Statement and a Fast Track Response to address the following matters: Nature of the dispute Issues Likely to Arise Applicant's [or Cross-Claimant's] Contentions* (which should include the material facts upon which the applicant intends to rely (which must be stated with adequate particulars) and the relief claimed and the legal grounds for that relief) Respondent's [or Cross-Respondent's] Responses to Contentions* (which should include the material facts upon which the respondent intends to rely, insofar as they are not included in the 'Fast Track Statement'; a reference to each allegation that the respondent or cross-respondent admits, does not admit or denies; and the legal grounds for opposing the relief claimed by the applicant) * Omit if inapplicable 35 As is apparent, fast track statements and responses are used instead of, or in substitution of, pleadings. They serve the same purpose as pleadings - to clearly define the issues to be tried, and to allow the other party an opportunity to know the case against them. In my view, they fall within the "inclusory nature of the definition of "pleading"" in the Rules: cf WR Carpenter Holdings Pty Ltd (ACN 008 401 796) v Commissioner of Taxation (2006) 234 ALR 451 at [35]. 36 Before leaving this aspect of the matter, it is relevant to consider the tax jurisdiction of the Court where the relevant document is an "Appeal Statement". An "Appeal Statement" is defined in the FCR to be a statement "outlining succinctly the Commissioner's contentions and the facts and issues in the appeal as the Commissioner perceives them": O 52B r 5(3) of the FCR. They take the place of pleadings, but they are not, in substance, pleadings: WR Carpenter at [35]; McDonald's Australia Ltd v Commissioner of Taxation (No 2) (2008) 69 ATR 898 at [6]; see also Pacific Exchange Corporation Pty Ltd v Federal Commissioner of Taxation (2009) 180 FCR 300 at [3] (cf Rio Tinto Ltd v Federal Commissioner of Taxation (2004) 55 ATR 321 at [22] - [27] and [58]). Their stated purpose is different - to give each party and the Court a practical understanding of the parties' positions and summarise the essential issues on appeal: BAE Systems Australia (NSW) Pty Ltd v Commissioner of Taxation for the Commonwealth of Australia (2008) 69 ATR 567 at [19]. Further, they are not subject to the same scrutiny as a pleading: BAE at [19]. 37 Contrary to the form and content of the appeal statements, Fast Track documents do not have the principal purpose or intention of making the exchange between parties merely practical or informative. The Fast Track documents operate instead of pleadings: Pt 4, Cl 4.1 of CM 8. They ensure that they clearly define the issues to be tried and allow the other party an opportunity to know the case against them. They seek to achieve those ends in the most efficient manner.

Other sources of power 38 Further, if there is doubt about the applicability of O 11 r 16 (and I do not consider there is), there are two further answers. First, this is a case in which I should direct (and out of an abundance of caution I do direct, pursuant to O 1 r 9(1)) that O 11 r 16 is to apply to the parties' Fast Track documents, thus engaging the provisions of O 11 r 16 for the purposes of considering the Applicants' motion: O 1 r 9(1). Secondly, I consider that s 33ZF and/or s 37P of the FCA provide the Court with power to strike out a paragraph in the AFTR. Section 33ZF of the FCA confers wide power on the Court in a representative proceeding. It provides that by the Court's own motion, or on an application by a party or a group member, the Court may "make any order the Court thinks appropriate or necessary to ensure that justice is done" in a proceeding under Pt IVA of the FCA. Finally and no less importantly, s 37P of the FCA confers power on the Court to give directions about practice and procedure to be followed in relation to a civil proceeding before the Court, in accordance with the overarching purpose under s 37M of the FCA: see [27] above.

Applicants' case 39 The Applicants' application to strike out paragraph 55(c)(ii) of the AFTR was put on a number of bases. First, the Applicants contend that a review of how the Applicants put their case and how issue is joined, demonstrates that the Inglis Exercise cannot be relevant to the Applicants' penalty argument. Further and alternatively, the Applicants contend that the Inglis Exercise is an ex post rather than an ex ante analysis. And it is for that reason that it is going to take so long and cost so much - the expert has to start from scratch and to devise an entire system for measurement of a cost never contemporaneously employed by ANZ. That is, the construction exercise does not deal with reality but is a hypothetical enquiry: a construction of a way ANZ might have sought to conduct its business and to record its expenses, but in fact never undertook. Thirdly, the Applicants contend the construction exercise does not focus on the loss that did or might flow from breach, but seeks to identify the matters set out in paragraph 55(c)(ii): see [9] above. Fourthly, the Applicants contend that the Inglis Exercise is not only extravagant, costly, time consuming and productive of delay but will not produce evidence relevant or necessary for the quelling of the penalty argument. Fifthly, the Applicants contend that ANZ's attempt to bring in "benefits" as well as costs into the Inglis Exercise (see [9] above) demonstrates that it is irrelevant to the penalty argument especially in light of the fact that in the AFTR, ANZ used the conjunctive "and" between the costs and the benefits allegations. 40 Finally, the Applicants contended that on the available material and without further explanation, it is open to conclude that the allegations in paragraph 55(c)(ii) have been made speculatively in order to generate an issue which ANZ cannot yet advance conscientiously.

ANZ's response 41 ANZ submits that it cannot be said that paragraph 55(c)(ii) of ANZ's AFTR is "manifestly groundless" or "so obviously untenable that it cannot possibly succeed". ANZ submit that Mr Inglis is not starting from scratch but is using the material already available to ANZ including existing cost allocations and "other work". As is apparent from the earlier analysis (see [11] to [16] above), that submission hides more than it reveals. 42 As noted, ANZ divides the Applicants' alternative penalty cases into what it describes as the Orthodox Penalty Case and the Expanded Penalty Case. The Orthodox Penalty Case relies upon the principle that the doctrine of penalties is only invoked if a clause in a contract requires a payment or transfer of property as a result of breach or termination following breach. The Expanded Penalty Case is predicated not upon a finding of breach but, instead, on allegations that the Penalty Provisions were within the area of obligation of the Applicants as it was their responsibility to ensure that they did not cause an event that would trigger the application of the Penalty Provisions (defined as a Default Event) and that the Exception Fees were out of all proportion or unrelated to the loss or damage which ANZ might have sustained by reason of the Default Event. ANZ submitted that the Inglis Exercise was relevant to the Applicants' Orthodox Penalty Case and to the Applicants' Expanded Penalty Case.

ANALYSIS 43 For the reasons that follow, I would strike out paragraph 55(c)(ii) of ANZ's AFTR pursuant to O 11 r 16 of the FCR and/or ss 33ZF and 37P of the Act. 44 The facts reveal (see [11] to [16] above) that the relevant sub-paragraph of ANZ's Fast Track Response (FTR) (and AFTR) was prepared and filed without any material that would support any of the allegations made in it. The facts described show further that the Inglis Exercise is intended to provide some opinion evidence to support the allegation. But this is after the allegation has been made in the FTR and the AFTR. The Inglis Exercise is not intended to provide any evidence of fact. By its nature, it could not and that is admitted by ANZ when it admits that it does not have any of the records that are or would be relevant to establishing the matters alleged in paragraph 55(c)(ii) of the AFTR. Rather, the relevant paragraph of the AFTR was prepared and filed in the (then unsubstantiated) hope that facts and evidence to prove facts could later be found to make out what was alleged. 45 The Applicants seek to have paragraph 55(c)(ii) of ANZ's AFTR struck out on the basis that it discloses no reasonable defence or allegation relevant to paragraph 52 of the Applicants' AFTS. The facts set out above (see [6] - [16] above) require that step. To "plead", without any factual foundation for the pleading is reason enough, at least in the circumstances of this case, to conclude that the pleading is an abuse of process. It is an abuse of process because the allegations are made in the AFTR without any foundation. 46 Abuse of process is a term that can be engaged in various circumstances. The High Court examined the use of the expression in Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at [9] - [16], especially at [15]. The particular species of abuse with which this application is concerned is where the Rules and procedures of the Court are being engaged for purposes and in ways that are foreign to the overall purposes of the Rules of Court - the fair, just and efficient determination of matters according to an adversarial mode of procedure. 47 The inclusion of paragraph 55(c)(ii) of the AFTR is a use of the processes of the Court for purposes foreign to the underlying and informing purposes of the Rules that govern the preparation of such documents. Paragraph 55(c)(ii) seeks to create a factual controversy where the party raising that controversy has no basis for doing so. 48 That is reason enough to conclude that the impugned sub-paragraph of ANZ's AFTR should be struck out. This conclusion is reinforced by a further consideration that emerged in the course of the hearing. 49 In paragraph 55(c)(ii) it is alleged that the quantum of the Exception Fees is not extravagant or unconscionable in comparison to two identified matters: the costs that would or might be incurred by ANZ as a consequence of, or in connection with, the occurrence of the relevant events and the benefits that would or might be received by the customer from the supply of the services supplied as a result of the occurrence of the relevant events. In the course of oral argument it emerged that despite the form of the pleading in the AFTR, ANZ in fact sought to rely on these matters as alternative or cumulative considerations (or both alternative and cumulative). As Senior Counsel conceded, "it sets out part of the bank's case". It is evident then that the pleading, as it now stands, must be amended if it is to articulate the case which ANZ seeks to make at trial. But tellingly, when Senior Counsel for ANZ was asked whether he had instructions to put a case in the form that he had indicated was intended to be the effect of the pleading, he answered that he did not have "separate" instructions to do so. Again, it is necessary to observe that the case for ANZ, as revealed by the AFTR, is a case which is founded, in this respect as well, on the speculative hope that someone, somewhere (it may be assumed preferably Mr Inglis and Deloitte) might come up with evidence that would support the asserted defence to the claim that now is made against ANZ. 50 To permit a pleading which seeks to raise a factual controversy to stand, when there is no factual basis on which the controversy is raised, would be to permit a new form of fishing for a defence. It should not be permitted. When it is said by ANZ that its fishing expedition would take not less than 13 months (possibly longer) and cost many many thousands of dollars there is even stronger reason to strike out the pleading as an abuse of process. ANZ seeks to subject opposite parties to an extended period of delay in the prosecution of their claim in the hope that evidence might be obtained that would support an ex post facto rationalisation of the amounts of charges that have been levied under contractual terms which ANZ set for itself. 51 On the facts and circumstances now revealed, ANZ should be shut out from litigating the issue it seeks to raise by paragraph 55(c)(ii). I refer to the facts and circumstances as they are "now revealed" because as will become evident later in these reasons for decision, the parties have identified separate questions for determination. Determination of those questions will not involve the Inglis Exercise. It is hoped that the determination of those questions will provide the parties with a proper and better assessment of critical aspects of the Orthodox Penalty Case and the Expanded Penalty Case in a more expeditious and cost effective manner. Whether, after the hearing and determination of those preliminary questions, the facts and circumstances as they are then known to the parties would justify some amendment to the pleadings is a question that cannot now be answered. 52 It is, however, important to go on to consider the other ways in which the strike out application was put.

Other Grounds - Inglis Exercise Not Relevant to the Law in Relation to Penalties 53 The Applicants submitted that paragraph 55(c)(ii) of ANZ's AFTR incorrectly gives rise to the contention that the Inglis Exercise may be of relevance to the penalty argument: see [39] above. 54 The principles in relation to the law of penalties have been considered on a number of occasions: see Ringrow; O'Dea v Allstates Leasing System (WA) Proprietary Limited (1983) 152 CLR 359; Acron Pacific Limited v Offshore Oil NL (1985) 157 CLR 514; Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292. 55 In Ringrow, the High Court referred to Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 where Lord Dunedin said (at 86-87): 2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage … 3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach … 4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are: (a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach ... (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid ... (c) There is a presumption (but no more) that it is a penalty when 'a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage': Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 App Cas 332 at 342 per Lord Watson. 56 As noted, the Applicants seek to advance alternative penalty cases - the Orthodox Penalty Case and the Expanded Penalty Case: see [42] above. The Applicants submit that the High Court has not authoritatively stated that the law of penalties must be confined to the case of breach and the doctrine of penalties should, in present times, be stated in broader terms. In support of the broader application of the law of penalties, the Applicants rely on Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2007] NSWSC 406 at first instance where Brereton J said: [A] penalty is a contractual liability to pay or forfeit or suffer the retention of a sum of money or property … which is agreed in advance to be payable (or forfeited or retainable), by one party to the other, upon or in default of the occurrence of an event which can be seen, as a matter of substance, to have been treated by the parties as lying within the area of obligation of the first party, in the sense that it is his or her responsibility to see that the specified event does not occur, and where the stipulated payment is out of all proportion or unrelated to the damage which might be sustained by the other party by reason of the particular occurrence or default. In these proceedings, the Applicants accept that their pleaded case about Exception Fees "will require consideration of the metes and bounds of the [penalty] doctrine as well as its orthodox application". 57 Strike out applications cannot and should not address questions of substance except where the result is clear beyond question: Dorrough v Bank of Melbourne Ltd (1995) 8 ANZ Ins Cas 61-290 at 76,245 and Pioneer Concrete (Qld) Pty Ltd at 172. I do not propose now to address the questions of substance raised in this case. Whether or not the Inglis Exercise is relevant to the Orthodox Penalty Case and/or the Expanded Penalty Case is an issue which might become necessary to determine at any subsequent trial. It would not be right to decide in this application whether the Applicants or ANZ have the better of the legal argument about these matters. I proceed on the basis that the arguments which ANZ seeks to advance in paragraph 55 of its AFTR are legally tenable. I express no view, one way or the other, about their ultimate correctness as propositions of law. But the propositions of law which ANZ seeks to advance in paragraph 55(c)(ii) are founded on assertions of fact and it is the absence of any factual foundation for the allegations which is of determinative significance in this application. 58 As previously mentioned, ANZ did not make any pre-estimate of loss in relation to the Exception Fees. And, of most significance for the present application, ANZ does not now have a factual basis for asserting that there was any net outgoing incurred in respect of any of the events said to found a penalty or exception fee. If there was a net outgoing incurred by ANZ in respect of some or all of the events or breaches concerned, ANZ does not now have any factual basis for identifying what the amount of that outgoing, or those outgoings may have been, whether the outgoings are considered as a global amount or are considered by being broken up by category of transaction or on some other basis. 59 The Inglis Exercise is a task that is intended to provide an opinion on those matters. It is a task that has not been done before and it is a task that, in Mr Inglis' words, "no one can be quite sure how long, in fact, it's going to take". Thirteen months is merely a best estimate provided by Mr Inglis in the circumstances. It is clear that the Inglis Exercise will result in substantial delay to these proceedings. Because the outcome of the exercise is not and cannot be known now, it is not possible to say that it will produce evidence that bears upon the issues which ANZ seeks to raise in the impugned paragraph of its AFTR. 60 There is one other matter that needs to be addressed. ANZ's arguments appeared to proceed on the premise that because a step was taken in The Office of Fair Trading v Abbey National PLC & Others [2009] UKSC 6, it is a step which is open, or must, be taken by ANZ in this case. If that is the premise, then I reject it. Each case must be considered on its facts and by reference to the circumstances at the time of any decision. In Abbey National, the contracts between the customers and the banks (and one building society) were different and, of course, did not involve the ANZ. No less significantly, the parties did not suggest to the trial judge that he could determine on the evidence before him whether the amounts levied by the banks were extravagant or unconscionable and no more than a genuine pre-estimate of loss: The Office of Fair Trading v Abbey National PLC & Others [2008] EWHC 875 (Comm) at [296]. That issue was, if necessary, deferred for consideration on another occasion: at [296].

Substantial Delay 61 In this context, ANZ submitted that the proper test to be applied in deciding whether the allegation should be allowed to stand is whether the amount charged was extravagant or unconscionable by comparison with the greatest amount that could conceivably be proved to have followed from the breach, and that the law does not require that such a comparison should have been undertaken before the contract was entered into. ANZ referred to De Francesch Builders Pty Ltd v Rile [2000] WASC 301; Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 and Clydebank Engineering and Shipbuilding Company Limited v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6. Again, it would not be right to decide in this application whether the Applicants or ANZ have the better of the legal argument about these matters. However, one must not lose sight of the fact that because ANZ did not have a pre-estimate of loss in relation to the Exception Fees, they rely upon the Inglis Exercise. As previously mentioned, an exercise that has not been done before and that, in Mr Inglis' words "no one can be quite sure how long, in fact, it's going to take". An exercise that, at best guess will take a minimum of 13 months and, regardless of the outcome will result in substantial delay to these proceedings. In my view, those facts would also provide a sufficient basis for striking out the paragraph under O 11 r 16 of the FCR and further or alternatively, under ss 33ZF and 37P of the FCA: see [43] to [51] above.

Publicly available information 62 On 8 March 2011, the day after the hearing, the Applicants filed and served a folder of publicly available documents produced between 1991 and 2006 (the public material). The folder included a copy of the documents listed in paragraph (a) of the particulars to paragraph 52(c) of the AFTS. 63 One of the documents listed in the particulars was a report by the Prices Surveillance Authority dated 30 June 1995 entitled "Inquiry Into Fees and Charges Imposed on Retail Accounts by Banks and Other Financial Institutions and by Retailers on EFTPOS Transactions" (the PSA Report). The Applicants submitted that the publicly available material (including the PSA Report) provides evidence that, inter alia, some bank charges exceed the costs of providing associated bank services and that the banks have not publicly contradicted the correctness of these materials. As noted above (see [23] above), applications to strike out a pleading (or a part of a pleading) under O 11 r 16 of the FCR is limited to the face of the pleading. I do not consider that these materials assist in the resolution of the motion.

CONCLUSION 64 For those reasons, I would strike out paragraph 55(c)(ii) of ANZ's AFTR pursuant to O 11 r 16 of the FCR and further or alternatively, ss 33ZF and 37P of the FCA. As noted earlier, that does not preclude ANZ from making application on proper material for leave to amend its AFTR to raise such an allegation if and when it is in a position to do so. At present, its current state of preparation (or lack thereof) in relation to the Inglis Exercise should not, and cannot, be permitted to delay the hearing of the core issue in these proceedings for in excess of 18 months since the issue was first raised in the hope (as ANZ would have it) that a factual controversy might be enlivened and determined in its favour. To permit such a course would be contrary to s 37M of the FCA and make a mockery of the overarching purpose which underpins the work of the Federal Court - to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.

B. APPLICATION FOR SEPARATE DETERMINATION OF PENALTY ARGUMENT 65 As discussed previously, the Applicants sought a separate hearing of the questions identified in [19] above, namely: 1. In respect of each of the Exception Fees, are the amounts payable upon breach, so as to be capable of amounting to a penalty? 2. In respect of each of the Exception Fees, are the amounts otherwise payable on the occurrence of an event within the area of obligation of the customer, such that they are capable of amounting to a penalty? (the Separate Questions). 66 On 10 March 2011, in accordance with directions made at the hearing, ANZ filed a response to the Applicants' proposed orders. ANZ's response was that "[i]f the Court is minded to order an initial trial of separate questions as proposed by the applicants, ANZ is content with the form of the questions …, on the understanding that both questions raise issues which correspond to the penalty and fee for service issues the subject of determination in Office of Fair Trading v Abbey National PLC & Others [2008] EWHC 875". The reference to an understanding of what is encompassed by the questions is important. It suggests that further work must be done by the parties to articulate the questions in a form that is unequivocally clear. 67 On 16 March 2011, the Applicants filed a document entitled "Exception Fees Proposed by Applicants for Initial Hearing" (the Initial Hearing Schedule). The Initial Hearing Schedule was divided into Savings Contracts, Card Contracts, Commercial Card Contracts and Business Contracts and, in relation to each category, listed the types of fees charged, the relevant penalty provision and the relevant contractual documents. Fourteen separate "cases" were identified. The Applicants also identified an example of each fee or "case" that they proposed be determined at the separate hearing. On 21 March 2011, ANZ's solicitors responded. There were two aspects to their response. ANZ proposed revisions to four cases. ANZ also identified what it described as "lack of conformity" between (1) the Initial Hearing Schedule and the AFTS and (2) the Initial Hearing Schedule and the Agreed Bundle of Contractual Documents. ANZ informed the Court that it would raise these matters with the Applicants' solicitors. As noted earlier, the parties have now identified and agreed examples of the various Exception Fees in the Contracts that could be heard and determined as part of an initial hearing. 68 Subsequently, on 22 and 30 March 2011, the Applicants and ANZ respectively filed a list of factual propositions that they contend would be relevant to a hearing of the Separate Questions. The lists do not coincide. The parties are in dispute. ANZ contends that if, contrary to its primary position, a trial of the Separate Questions is ordered, then the question of whether and how an initial trial should proceed ought to be the subject of submission and determination at a further directions hearing.

Should there be a trial of the Separate Questions? 69 The Applicants seek the trial of the Separate Questions pursuant to ss 33Z(1), 33ZF(1) and/or s 37P(2) of the FCA and further or alternatively, O 29 r 2 of the FCR. ANZ opposes the application. ANZ submits that the separation of claims and allegations will lead to increased costs for the parties, prolong the litigation and is an inefficient use of the Court's resources. ANZ further submits that a separate hearing will result in the proceeding becoming fragmented, cause litigation costs and judicial resources to escalate, and will further delay the final resolution of the litigation. 70 In Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 (at [8]), Branson J summarised the principles that govern circumstances in which an order will be made under O 29 r 2 of the FCR. The principles are well known and it is unnecessary to repeat them. They have been applied in numerous cases: see, most recently, Nunagin Holdings Pty Ltd v Evertop Investments Pty Ltd (No 2) [2010] FCA 1228 at [6] - [11] and the authorities cited. 71 In my view, consistent with those principles, it is appropriate that there be a trial of the Separate Questions. The determination of the Separate Questions will not lead to a disposal of the action. They will however provide a proper basis for the parties to better assess their risk and that will inevitably contribute to a better prospect of settlement. The issues raised will be narrower because the Applicants' other causes of action will not be addressed. If the Separate Questions are determined adversely to the Applicants, the Applicants concede that they would need to reconsider whether to continue to press the broader and other causes of action. No less importantly, it is apparent that a trial of the Separate Questions could be prepared and brought to trial in the next 12 months. 72 Contrary to the submissions of ANZ, such an outcome is consistent with and will promote the overarching purpose in s 37 of the FCA. This proceeding is one where the "utility, economy and fairness to the parties" of a trial of the Separate Questions is beyond question: cf Tepko Pty Limited v Water Board (2001) 206 CLR 1 at [170]. 73 The utility of a hearing of the Separate Questions is a determination of critical issues - the proper construction of the Contracts containing the Exception Fees (Questions 1 and 2). Economy and fairness considerations may be tested by posing a rhetorical question - what happens if the Court does not separately determine the Separate Questions? The trial of the Applicants' proceedings (customers of ANZ) is delayed for a period of years while the Inglis Exercise is completed - a construction exercise which will take at least 13 months and probably longer, may not provide the facts and evidence that ANZ speculates might exist, will be expensive and, if and when finished, will necessitate further delays while the Applicants consider what is produced and then respond. Mr Inglis acknowledged that the model he is creating may be disputed: see [16] above. He talked about amendment by the Court. He does not refer to the fact that the model (in its entirety or in part) is likely to be the subject of challenge by the Applicants. If ANZ's submissions were accepted, it would be a classic case of the tail wagging the dog. That cannot be permitted to occur. ANZ has obligations to its customers as their banker. ANZ and its lawyers have obligations to the Applicants and the Court under ss 37M and 37N of the FCA. ANZ's response - it will do as much as it can as quickly as it can - does not provide an appropriate answer to those obligations. 74 In those circumstances, I do not accept that a Court should wait and conduct a trial of all issues in two or three years time. It is simply an inappropriate way in which to conduct this piece of litigation. I accept that the outcome is not perfect - it will not inevitably resolve all or a substantial part of the proceeding. But it might. And to adopt the alternative, is to permit ANZ to incur substantial costs (which if it is successful it will seek to cast on the Applicants) and necessarily to delay the hearing for years when the construction exercise we are asked to wait for has never been done before and there is no certainty that it can be done. 75 I will list the matter for further directions on 5 May 2011 to address the hearing of the Separate Questions. I will direct that the Applicants and ANZ confer prior to that directions hearing to seek to agree upon the form in which the Separate Questions should be identified, on the orders that are necessary to give effect to these reasons for decision and on orders to bring on the trial of the Separate Questions without delay. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.