Australian Securities & Investments Commission v Westpac Banking Corporation

1. The Applicant's interlocutory application filed 7 December 2018 be dismissed.
2. Costs be costs in the cause. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PERRAM J: 1 By interlocutory application filed 7 December 2018 ASIC applies pursuant to r 30.01 of the Federal Court Rules 2011 (Cth) for an order that certain separate questions now be determined in advance of a trial. The questions are as follows: '1. Whether, in relation to each of the Home Loans entered into by Westpac with consumers during the period between 12 December 2011 and March 2015 (as defined in the Statement of Facts contained at Annexure SJM3 to the Affidavit of Simon Moran affirmed 6 December 2018), on a proper construction of the National Consumer Credit Protection Act 2009 (Cth) (the Act), when Westpac was required under s 129, for the purposes of s 128(c), to make an assessment that assessed whether the credit contract will be unsuitable for the consumer if the contract is entered into (an Unsuitability Assessment): (1) Westpac was required, before making the Unsuitability Assessment, to make reasonable inquiries about the consumer's financial situation, including about the consumer's income and expenses? (2) Westpac was required, as part of the Unsuitability Assessment, to assess whether, at the time of the assessment, it is likely that the consumer will be unable to comply with the consumer's financial obligations under the contract, or could only comply with substantial hardship, if the contract is entered into (an Affordability Assessment)? (3) In order to make the Affordability Assessment required by the Act, Westpac was required to assess the consumer's financial situation at (or about) the time of the assessment, including as to the consumer's income and expenses? (4) In order to make the Affordability Assessment required by the Act, Westpac was required to take into account information about the consumer's financial situation including about the consumer's income and expenses?' 2 Rule 30.01 provides: '30.01 Application for separate trials (1) A party may apply to the Court for an order that a question arising in the proceeding be heard separately from any other questions. (2) The application must be made before a date is fixed for trial of the proceeding. Note 1: The Court may order that a party state a case and the question for decision. Note 2: The Court will give any directions that are necessary for the hearing of the separate question.' 3 Subrule (2) would prevent the stating of a separate question in this case because the matter has already been fixed for hearing. During the hearing of this interlocutory application I indicated that I would dispense with the operation of subrule (2) which I do pursuant to r 1.34. Whilst I do not share the view held in some circles that r 1.34 should be used frequently, the circumstances of this case are far from usual. I do not think that r 30.01(2) was intended to cover the somewhat unique circumstance where the parties seek to regroup after the Court refused to endorse a settlement where the matter previously had been fixed for hearing. 4 I do not think, however, that the separate questions should be stated. My reasons for this are twofold. First, whilst I am satisfied that the separate question procedure may shorten the trial process itself it will also create the distinct risk that there may be two sets of appeals: one from the separate questions and one from the trial. Given the significance of the issues at stake for both parties, I consider an appeal to the Full Court from any determination by me of the separate questions almost certain (assuming leave were granted) with a significant risk of an appeal to the High Court thereafter. Those steps would delay by at least a year the final resolution of this proceeding. 5 In itself, that would not necessarily be a problem but the savings in terms of trial time to which ASIC point are comparatively modest. At the moment, the full trial would almost certainly take no more than 10 hearing days and much of the material for trial has already been prepared (and is sitting in my chambers). Even if ASIC prevailed on the separate questions, ASIC has acknowledged that there would still need to be a further hearing on the balance of the case. If ASIC lost on the separate questions, ASIC has indicated it would press a much narrower case but would still require 2-3 hearing days. Given that the hearing of the separate question process will most likely take 1-2 days this means that the separate question process will reduce the hearing time by no more than 50%. 6 Secondly, I am not as confident as ASIC that the separate questions may not give rise to problems further down the track. In that regard, it is worth observing that the statutory provisions subject to the separate questions are complex as is the underlying factual substratum. My concern is that with all that complexity the potential for unforeseen adverse developments to occur is large. This is particularly so where Westpac has opposed the separate question procedure partly for this reason and has sought to set the matter down for final hearing. 7 In saying that I do not overlook that this is a difficult concern for ASIC to confront for it obliges it to prove the non-existence of unknown unknowns which would hardly be unknown if they could be disproved. However, it is just such concerns which have frequently underpinned statements about the caution with which this process should be enlivened: '[separate question procedures] should, in our opinion, only be embarked on when their utility, economy, and fairness to the parties are beyond question' (Tepko Pty Limited v Water Board [2001] HCA 19; 206 CLR 1 at 55 [168]-[170] per Kirby and Callinan JJ). I just do not have that degree of confidence. 8 For completeness, I do not think ASIC is to be criticised for bringing this application which is not without merit. 9 The application is refused. Costs will be costs in the cause. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.