Clark v National Australia Bank Limited

NATURE OF THE AMENDMENTS 9 Before addressing each of NAB's bases of opposition, it is convenient to briefly describe the Applicant's proposed amendments. In summary, the proposed amendments: (1) amend the group member definition, to include purchasers of NAB Personal Loan Cover, as well as to further develop the characteristics of the group members who purchased NAB Credit Card Cover; (2) extend the circumstances of unconscionable conduct alleged against NAB and MLC to include the sale of credit insurance policies to customers of NAB with a personal loan; (3) augment the facts and particulars in support of the circumstances surrounding the entry into and giving effect to the credit insurance policies, including: (a) the conduct of NAB and MLC in relation to the sale of credit insurance policies online through the nab.com.au website, telemarketing and direct branch sales; (b) that the credit insurance policies were inappropriate products for the Applicant and group members, in light of the unlikelihood of requiring or being able to benefit from the cover and the high premiums paid under the policies; (c) the knowledge of each of NAB and MLC that the credit insurance policies had no or little value for the Applicant and group members; (d) the failure by NAB and MLC to disclose relevant matters to all or a proportion of the Applicant and group members, including: that the credit insurance policy was optional, had no bearing on their application for finance from NAB, and was a product separate to their financial product with NAB; the cost of the policy; the low claims ratio under the policy; the exclusions to cover applicable to them; that the 'life' cover was more for NAB's benefit than theirs; that the policy was unsuited to their needs; and (e) the misleading or deceptive conduct of NAB in the sale of a proportion of the credit insurance policies; and (4) add a cause of action against NAB in relation to misleading or deceptive conduct in contravention of s 12DA of the ASIC Act. 10 Having regard to the relevant order I made on 13 June 2019, the remainder of these reasons is structured around dealing with each of NAB's three bases of opposition to leave being granted.

FIRST BASIS OF OPPOSITION: BREACHES HARMAN OBLIGATIONS 11 The High Court described the Harman obligation in Hearne v Street (2008) 235 CLR 125 ('Hearne') at [96] (per Hayne, Heydon and Crennan JJ) as follows: Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. 12 The Harman obligation applies to documents and information disclosed compulsorily in the course of a proceeding, including discovered documents and documents produced pursuant to a subpoena: see, eg, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 at 222-223; Hearne at [96]. This is to ensure that privacy and confidentiality are not invaded more than is necessary for the purpose of doing justice: Hearne at [107]. 13 The obligation is breached when documents obtained by compulsory process are used for a purpose other than the purpose for which the documents were given, unless the documents are received into evidence or leave is given: Hearne at [96]. That other purpose has been described as 'collateral' or 'ulterior' to the purpose for which the documents were produced: see, eg, Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 57 FCR 360 ('Allstate'). 14 The Harman obligation is a substantive obligation: Hearne at [105]-[108]. A breach of the Harman obligation may be prevented by the Court by either declining to grant leave sought by a party to take a step in a proceeding that is in breach of that party's Harman obligations, or by ordering a stay of the relevant court process that gives rise to the breach: see, eg, Connective Services Pty Ltd v Slea Pty Ltd (2017) 53 VR 130 ('Connective Services'). As already noted, in the present proceeding NAB sought to oppose leave being granted to the Applicant by way of both forms of relief: it opposed leave being granted to the Applicant simpliciter, and also sought a stay of the Applicant's interlocutory application in the manner granted by Almond J in Connective Services. 15 Turning to the Applicant's proposed new case, it must first be said that there is no doubt that the Applicant has 'used' the documents it obtained by way of discovery and subpoena in making the proposed amendments to its pleadings. This is supported by the affidavit evidence relied on by both the Applicant and NAB. 16 NAB rightly accepted that the Applicant is entitled to use the relevant documents to amend her existing claim to, for instance, include additional or different relief in relation to credit card insurance. That would not breach her Harman obligations. However, on NAB's submission, the amendments were such as to mount an entirely new case in relation to personal loan insurance, which it characterised as an entirely different insurance product. 17 I interpolate that, on one view, it may be that a permissible purpose for which documents protected by Harman may be used is simply the use of such documents in the same proceeding: see Allstate at 378-379. However, I proceed on the basis that there must be some 'reasonable relation', to use the language of Ryan J in Arnold Mann v Medical Defence Union Ltd [1997] FCA 45 ('Mann'), between the existing case and the 'new' case. 18 In support of this, NAB identified a number of features that rendered the use of the relevant documents to prosecute the Applicant's case regarding personal loan insurance products inimical to her implied Harman undertaking: (1) NAB Personal Loan Cover has different terms and conditions, different premiums and different benefits as compared to NAB Credit Card Cover, and the products are neither linked nor operate inter-dependently; (2) the Applicant has never applied for or received a personal loan from NAB, and has never applied for or received a personal loan insurance product; and (3) as a result of (1) and (2) above, the Applicant lacks standing to bring claims for relief in relation to NAB Personal Loan Cover in freestanding proceedings. 19 NAB contended that, having regard to the features it identified, the Applicant's use of the documents to found a claim concerning personal loan insurance products would be for a purpose that is 'collateral' or 'ulterior' to the purpose for which the documents were produced. Adopting the approach taken by Chesterman JA in Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 4) [2011] 1 Qd R 145, NAB characterised the issue in the following way: [T]he documents [the Applicant] seeks to use in aid of the new claim concerning personal loan insurance were not disclosed for the purpose of resolving that claim, but were disclosed to assist in the resolution of a dispute concerning something else entirely - namely, a dispute concerning the issue of NAB Credit Card Cover. 20 NAB also evaluated the issue through a different lens. In Mann, Ryan J asked whether the new claim operates independently of the existing case made by the Applicant. In that case, his Honour held that a proposed new defamation claim: [C]ould succeed or fail quite without reference to the resolution of the other existing issues between the parties. I therefore regard it as entirely collateral to the attack which the applicant seeks to mount through the remaining parts of his proposed further amended statement of claim. 21 Because, on NAB's submission, the two insurance products were sufficiently different, and the causes of action between the existing case and the proposed new case were sufficiently distinct, the Applicant should not be granted leave to amend her pleadings, or in the alternative, her interlocutory application seeking the same should be stayed as was done in Connective Services. 22 However, I am not persuaded that there exist such differences between the two insurance products so as to compel me to accede to NAB's submissions. In other words, I consider the claims in respect of NAB Credit Card Cover and the proposed claims in respect of NAB Personal Loan Cover are sufficiently connected for the Applicant's proposed amendments not to breach her implied Harman undertaking. 23 In this regard, despite the differences raised by NAB, the following similarities between the insurance products and the manner in which they were marketed or sold are relevant: (1) The type of policy is the same. Each product comprised of insurance in relation to a financial product that the relevant customer held with NAB. (2) The material terms of the two insurance products are the same or substantially similar. Each provide four forms of cover: 'life', 'critical illness', 'disability' and 'involuntary unemployment' cover. Both products were subject to the same policy exclusions. (3) To the extent known, the manner of sale of the products was substantially the same. NAB arranged the sale and issue of its personal loan and credit card insurance, with sales conducted by NAB's website, by direct mail and by telephone. NAB Personal Loan Cover was also sold by staff members at local branches. (4) The possible issues with the insurance products are the same. In each case, customers who were not 'gainfully employed' at the time of entry into either form of insurance were said to be unlikely to benefit from the 'involuntary unemployment' cover or the 'disability' cover. Similarly, customers who had a critical illness (or a pre-existing condition, with respect to NAB Personal Loan Cover) were said to be unlikely to benefit from the 'critical illness', 'life' or 'disablement' cover. (5) Finally, the relevant factors to which a Court may have regard under s 12CC(1)(a) of the ASIC Act - being the section that sets out the matters a court may have regard to for the purposes of determining whether a person has contravened s 12CB of that Act, relevantly the section invoked by the Applicant in the primary proceeding - are substantially the same: (a) whether NAB and MLC had significantly stronger bargaining positions than each of the customers in arranging the issue of the policies (and, with respect to MLC, in issuing and giving effect to the policies); (b) whether the customers were able to understand the documents constituting the credit insurance policies, and in particular the terms relating to their eligibility for the benefits; (c) the availability of identical or equivalent credit insurance policies from companies other than NAB and MLC (albeit that the analysis of the amount for which and circumstances under which such products could be acquired may differ); (d) the requirements on NAB under the Code of Banking Practice; and (e) the extent to which NAB and MLC were willing to negotiate the terms and conditions of the credit insurance policies (under each, it is alleged that the terms were standard terms which NAB and MLC were not willing to negotiate with the customer; that the customer was not given an effective opportunity to negotiate the terms; that MLC had a unilateral right to vary the terms and conditions). 24 This, in my view, supports the conclusion that there exists a reasonable relationship between the claims concerning the two insurance products, such that the Applicant ought to be granted leave to amend its pleading in the manner proposed. 25 I acknowledge that the Applicant did not have NAB Personal Loan Cover. However, this is of no moment as she is, as I will explain, entitled to bring the claim as a representative of the group members. In addition, Part IVA of the FCA Act provides for mechanisms, including the bringing before the Court of sample group members, to allow for the adjudication of all group member claims. 26 Even if I am wrong in reaching this conclusion and the Harman obligation does arise in respect of the documents obtained and the Applicant's proposed new case, the Applicant ought to be relieved of her implied Harman undertaking in view of the special circumstances that exist in this case. Those special circumstances include the facts that: (1) the relevant documents were provided to the Applicant after NAB had the opportunity to make extensive redactions; (2) the use of the information gleaned from the document is very confined in the context of amendments otherwise made based on publicly available information; (3) the documents are not marked 'confidential' and nor were they prepared in circumstances that suggest they were intended to remain confidential; and (4) the use of the documents to allow the proposed amendments will avoid a multiplicity of proceedings, in circumstances in which the law 'strongly favours the avoidance of a multiplicity of proceedings': Pinara Group Pty Ltd v Whiting [2013] FCA 1378 at [34]; see also Allstate at 379. 27 For these reasons, I reject NAB's first basis of opposition.

SECOND BASIS OF OPPOSITION: OFFENDS PART IVA OF THE FCA ACT 28 Relevantly, s 33C(1) of the FCA Act provides as follows: Subject to [Part IVA], where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them. 29 NAB's complaint, as outlined above, is that the proposed amendments leaves the Applicant as the sole representative party despite the fact that she has never acquired NAB Personal Loan Cover. NAB says that just because its personal loan and credit card insurance are each distributed and issued by the same entities, being NAB and MLC, this is not sufficient to demonstrate that the claims against each are 'in respect of, or arise out of, the same or similar or related circumstances', as required under s 33C of the FCA Act. 30 The real issue before me is whether the claims are 'in respect of … related circumstances'. 31 That section, and the operation of Part IVA more broadly, has been the subject of much analysis by this Court. 32 Although in respect of different facts and circumstances, in Dillon v RBS Group (Australia) Pty Ltd (2017) 252 FCR 150, Lee J at [44] explained that: The 'claims' of all persons referred to in this 'gateway' provision are only required to be in respect of, or arise out of, similar or related circumstances and give rise to one substantial common issue of law or fact. It necessarily follows that the claims of the applicants (who represent the group) and group members (represented persons) can be quite different. 33 In Webster (Trustee) v Murray Goulburn Co-Operative Co Ltd (No 2) [2017] FCA 1260 at [77], Beach J summarised Lee J's synthesis of s 33C as follows: First, the concept of "claim" as used in s 33C has a wide meaning and is broader and different to the concept of a cause of action. Second, the claim of one person does not need to be based upon the same conduct as the claim of another person and, moreover, may arise out of a separate and different transaction, as long as the threshold elements of s 33C(1)(b) and (c) are satisfied. Third, the fact that the plaintiff's case may ultimately fail does not mean that the plaintiff does not have a claim per se in terms of satisfying the threshold elements at this point. Fourth, a claim of a member say of sub-group A and a claim of a member say of sub-group B can both be together undifferentiated "claims" within the statutory term as used in s 33C(1); the very idea of sub-groups entails that they are part of a broader set i.e. a group having and making claims through the representative party. And if one appreciates that proposition, then the real focus must be on the conditions in s 33C(1)(b) and (c). (Emphasis added) 34 Finally, pitched at a more general level, French J in Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 held (at 404-405): The outer limits of eligibility for participation in representative proceedings are defined by reference to claims in respect of or arising out of related circumstances. The word "related" suggests a connection wider than identity or similarity. In each case there is a threshold judgment on whether the similarities or relationships between circumstances giving rise to each claim are sufficient to merit their grouping as a representative proceeding. At the margins, these will be practical judgments informed by the policy and purpose of the legislation. At some point along the spectrum of possible classes of claim, the relationship between the circumstances of each claim will be incapable of definition at a sufficient level of particularity, or too tenuous or remote to attract the application of the legislation. (Emphasis added) 35 With this commentary in mind, but focusing on the legislative requirements, the proposed amendments in this case satisfy the criteria under s 33C. First, seven or more persons have 'claims' against the same two persons (being NAB and MLC). All claims relate to credit insurance policies issued by NAB and MLC to the current and prospective group members; it is not of significance that some policies were issued in respect of credit card insurance while other policies were issued in respect of personal loans. Second, the 'claims' of all of the current and prospective group members are 'in respect of, or arise out of, similar or related circumstances'. While much of this is addressed in my reasons concerning the application of the Harman obligation above at [23], in short compass, all existing and prospective group members were issued with an MLC insurance policy - arranged by NAB - with the same type of cover and exclusions in respect of a financing product issued by NAB, and paid premiums under that policy during the relevant period. And third, the claims of all the current and prospective group members give rise to one or more substantial common issues of law or fact. 36 For these reasons, I am satisfied that the proposed Amended Originating Application and Further Amended Statement of Claim comply with the requirements of s 33C of the FCA Act. 37 In addition, NAB highlighted practical difficulties (including the potential for conflicts of interest) with the Applicant continuing as the sole representative group member in the proceeding. In my view these practical difficulties are overstated, are inherent in proceedings brought under Part IVA of the FCA Act, and can be managed appropriately by the Court.

THIRD BASIS OF OPPOSITION: JEOPARDISES EXISTING TRIAL DATE 38 As noted above, NAB's final basis upon which it opposed leave being granted to the Applicant was that doing so would risk jeopardising the existing trial date, set to commence on 23 September 2019. 39 NAB submitted that only the amendments regarding the proposed new case concerning personal loan insurance would risk jeopardising the trial date. The balance of the amendments concerning credit card insurance, which as mentioned it did not oppose, were said by NAB not to risk jeopardising the scheduled commencement of the trial. 40 In contrast, the Applicant submitted that the trial date was already in jeopardy. She blamed this state of affairs on alleged tardiness in NAB's discovery of documents, specifically in respect of two key documents said to have been sought as early as December 2018 and February 2019, which were ultimately only said to have been provided on 16 April 2019. As for the effect of the amendments themselves, the Applicant submitted that they were unlikely to significantly add to time needed for the preparation of evidence. 41 One possible solution to this quandary could be to allow the proceeding (as presently pleaded) to proceed to trial, with a separate action (dealing with the matters contemplated in the Applicant's proposed Amended Originating Application and a Further Amended Statement of Claim) to follow. However, this would be contrary to the principles of good case management and lead to a multiplicity of proceedings in circumstances where, in my view, there should be only one. 42 With that possible solution dispensed with, what then is to become of the current trial date scheduled for this proceeding? Having regard to the submissions and to the discourse between the bar table and the bench, it seems to me that whether or not the amendments are allowed makes no difference to whether or not the existing trial date can be met. It seems almost inevitable that no matter the scope of this proceeding - whether limited to the case as pleaded or expanded to cover the 'new' case proposed by the Applicant - the scheduled trial commencement date on 23 September 2019 will not be achieved. Whilst the Court is not currently in a position to attribute blame to any party as to any alleged delays in the discovery of documents, the fact that the existing trial date will not be met is the reality. 43 In the circumstances, I consider that it is appropriate to allow the amendments to the Applicant's pleadings, and the best solution in respect of the now jeopardised trial date is for it to be rescheduled to a realistic date in December 2019.

CONCLUSION 44 For the reasons outlined above, I will allow the Applicant's interlocutory application dated 29 May 2019 and give leave to the Applicant to file and serve its proposed Amended Originating Application and a Further Amended Statement of Claim. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.