Human Appeal International Australia v Beyond Bank Australia Ltd

Supreme Court of NSW|2023-09-06|Before: Parker J

JUDGMENT

This is a case about "de-banking". The neologism refers to banks withdrawing banking services from, or refusing banking services to, certain customers or classes of customer. Typically, as in this case, it involves a bank exercising a discretionary power, under its contract with the customer, to close the customer's accounts, even though those accounts are in credit and are being operated in accordance with the Bank's trading terms.
The customer in the present case is Human Appeal International Australia ("Human Appeal"). Human Appeal is a company limited by guarantee. It operates as a charity, with particular support from the Muslim community in Australia, and is registered with the Australian Charities and Not-for-profits Commission. Human Appeal was established more than 30 years ago. I was told by counsel for Human Appeal from the Bar Table that it is the largest Muslim charity in this country.
The case for Human Appeal in these proceedings is that it has been wrongfully de-banked by Beyond Bank Australia Limited ("Beyond Bank"), the defendant.
Australian banks may be divided into various classes. One class consists of commercial banks, which include the "big four". These banks are owned by private shareholders and operate on a for-profit basis. Another class consists of mutual banks. Such banks, like credit unions and building societies, are owned by their members.
Beyond Bank is a mutual bank. It is a company limited by guarantee. Its membership consists of its customers (and, in some circumstances, former customers). In theory, the members of the Bank may receive dividends out of its profits and are entitled to share in its surplus assets on winding up. But, in practice, the Bank seems not to pay dividends to its members.
Human Appeal established banking facilities with Beyond Bank in March 2021. As a result, it became a member of the Bank. But then, in mid-August, the Bank notified, purportedly in reliance on the banking terms and conditions which apply to the accounts, that it was closing them. The Bank declined to give any reasons for its action other than to say that a review had been conducted and the business was not suitable. At the time, the combined credit balance of the accounts was approximately $6.1 million.

Claims for determination

These proceedings were commenced on behalf of Human Appeal on 17 September 2021. Although up until that point Human Appeal's solicitors had only sought an extension of the banking facilities until the following year, the prayers for relief made it clear that Human Appeal was contending, among other things, that the termination of its banking facilities was wrongful, and that it was entitled to require the Bank to continue to provide banking services to it. A consent injunction was granted until further order of the Court, which required the Bank to continue to provide those services, and they continue to be provided.
The proceedings were commenced by Summons, but among the interlocutory orders sought in the Summons was an order that Human Appeal plead its case by way of statement of claim. But no such order was sought from the Court, and the proceedings appear to have languished after the grant of the consent injunction.
Earlier this year, an application was made on behalf of the Bank for the proceedings to be dismissed for want of prosecution. This resulted in a cross-application for leave to file a Statement of Claim. The two applications were the subject of a judgment by Slattery J: Human Appeal International Australia v Beyond Bank Australia Ltd [2023] NSWSC 382. I will refer to paragraphs of that judgment below as "J1".
His Honour refused the Bank's application for summary dismissal, despite the unfortunate procedural history. Given this conclusion, the making of an order and directions for the pleadings was not contentious. His Honour was, however, clearly concerned at the length of time the proceedings had taken. He suggested that they might warrant expedition: J1 [73]-[74]. An application was made for expedition, which was granted in May.
The hearing took place on 30 August and was followed by written submissions and further oral submissions on 6 September. In the course of the hearing on 30 August, Human Appeal's statement of claim was amended without objection from the Bank. Further amendments were made to the prayers for relief in the course of the hearing on 6 September. Although counsel for the Bank complained about the lateness of the amendments, they addressed the merits of the amendments in their submissions and did not suggest the Bank was prejudiced.
As presented in final submissions, Human Appeal's case consisted of two main claims for relief.
The first claim focussed on the decision to terminate Human Appeal's banking facilities. The contention was that the Bank was only entitled to do so if it was acting in good faith and reasonably. In the argument before Slattery J, one of the foreshadowed arguments in support of this contention had been based on the terms of the Bank's constitution: see J1 [58]-[67]. But this argument was not pursued at the hearing before me. Instead, the focus was on the Bank's contractual obligations to Human Appeal as customer. Reliance was placed, in particular, on the duty of cooperation and good faith generally implied in commercial contracts.
Counsel for Human Appeal invited me, if satisfied that the Bank had no entitlement to terminate the account except on reasonable grounds, to find on the evidence that no reasonable grounds existed. It would follow, according to the argument, that the purported termination of the banking facilities was invalid. I was asked to make a declaration to that effect. Counsel accepted, of course, that it would remain open to the Bank to terminate in the future on lawful grounds.
The second claim was wider and focussed on the trading terms used by the Bank. Those terms refer to the Code of Practice which has been adopted by the Customer Owned Banking Association, which is an industry group consisting of representatives of Australia's credit unions, building societies and mutual banks. In particular, the Code of Practice provides that those terms should fairly balance the interests of the Bank and its customers.
The argument for Human Appeal was that termination without justification, or reasons, if permitted under the terms and conditions, breached that requirement of the Code of Practice. The terms and conditions were expressed to incorporate, and to be subject to, the terms of the Code of Practice, and accordingly, it was contended, compliance with the Code could be enforced by the customer against the Bank. I was asked to make orders compelling the Bank to vary its terms and conditions so as to require the existence of reasonable grounds, and proper notice of termination.

Anti-Money Laundering and Counter-Terrorism Financing Act

As I will describe in due course, counsel for the Bank contended that its decision to close Human Appeal's accounts had to be understood in the context of its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). I will therefore set out the relevant provisions of the Act (to which I refer as the "Commonwealth Act"), before summarising the evidence and dealing with the parties' arguments.
The Act, as its name suggests, is concerned with the detection, deterrence and disruption of money laundering, the financing of terrorism and "other serious financial crimes". In particular, it provides for a system of gathering information from Australian financial institutions ("reporting entities") which may be relevant to combatting such crimes (see the objects in s 3(1)). The Act is administered by the Australian Transaction Reports and Analysis Centre ("AUSTRAC") which is headed by a Chief Executive Officer ("AUSTRAC CEO").
Part 3 of the Act (ss 40 to 51) defines the obligations of reporting entities to provide information to AUSTRAC. It imposes reporting obligations on providers of a "designated service" to a "customer" (see s 6).
Section 41 deals with reports of "suspicious matters". These are circumstances which are "reasonably suspected" by the reporting entity in relation to the provision (including the prospective provision) of the service. They include: that a person or agent might not be who they claim to be (s 41(1)(d) and (e)); that information held by the reporting entity concerning the service, may be relevant to investigating or prosecuting offences against, or of assistance in enforcing, specified legislation (s 41(1)(f)); that the service is preparatory to a financing of terrorism offence (g), or a money laundering offence (s 41(1)(g) and (i)); and that information held by the reporting entity concerning the service, may be relevant to investigating or prosecuting a financing of terrorism offence or a money laundering offence (s 41(1) (h) and (j)).
Part 3 imposes other reporting obligations on reporting entities. One (s 43, subject to exceptions in s 44) concerns the provision of designated services involving a "threshold transaction" (a term defined in s 5, but particularly concerned with transfers of physical currency of at least $10,000). Another (s 45, which applies to a "person") is concerned with sending or receiving an "international funds transfer instruction" (as defined in s 46).
When a report has been made under s 41 (or ss 43 or 45), the CEO of AUSTRAC and other specified officials have a power to request information or documents (s 49(1)). A written request can be made of the reporting entity or "any other person". The recipient must comply within a specified period and in a specified way, by disclosing requested information to the extent that they have it, and by producing requested documents to the extent that they are "relevant to the matter to which the communication under section 41, 43 or 45 relates" (s 49(1)(i)(ii)) and are in their possession or control (s 49(1)(i)(iii)). A notice can only be issued if the issuer "reasonably believes that the recipient has knowledge of the information, or possession or control of the document" sought (s 49(1A)). Compliance with a notice is mandatory (s 49(2)), and non-compliance is subject to civil penalties (s 49(3)).
Part 7 of the Act (ss 80 to 93) seeks to ensure that a reporting entity conducts its operations in accordance with a program designed to identify, mitigate and manage the risk that the entity may (even if inadvertently) be used to facilitate money laundering or financing of terrorism. Reporting entities are required to have an "anti-money laundering and counter-terrorism financing program" before providing a "designated service" to a customer (s 81(1)). Such programs can be "standard" (s 84), "joint" (s 85), or "special" (s 86). The entitlement to adopt a "special" program is extremely confined (see s 86(2)) and can be disregarded for present purposes.
The Act recognises that such a program may, and presumably usually does, require co-operation from customers. Standard and joint programs have two parts - Part A (general) and Part B (customer identification). A reporting entity that has adopted a standard or joint program, is providing (or has provided) a designated service to a customer, and has "reasonable grounds to believe that the customer has information likely to assist the reporting entity to comply with" Part A (s 92(1)), can request information from a customer (s 92(2)). If the customer does not comply with the request, the reporting entity may decline to provide services, or restrict the services it provides, to the customer (s 92(4)), until the request is complied with.
Section 92(5) protects the reporting entity against liability for actions or omissions, in exercise (or purported exercise), of its power under subsection (4), provided they are done in good faith (see also Rofe Way Pty Ltd v Ronald [2023] NSWSC 1086 at [78]). It provides: An action, suit or proceeding (whether criminal or civil) does not lie against: (a) the reporting entity; or (b) an officer, employee or agent of the reporting entity acting in the course of his or her office, employment or agency; in relation to anything done, or omitted to be done, in good faith by the reporting entity, officer, employee or agent in the exercise, or purported exercise, of the power conferred by subsection (4).
Division 3 of Part 11 (ss 123 to 124) contains provisions directed to maintaining the secrecy of specified types of information reported under Part 3.
Section 123 is headed "offence of tipping off". It contains various prohibitions, including: (1) A reporting entity must not disclose to a person other than an AUSTRAC entrusted person [defined in s 5, broadly speaking, as an officer, employee or contractor of AUSTRAC]: (a) that the reporting entity has given, or is required to give, a report under subsection 41(2); or (b) any information from which it could reasonably be inferred that the reporting entity has given, or is required to give, that report. (2) If: (a) a reporting entity gives a report to the AUSTRAC CEO under section 41, 43 or 45; and (b) in connection with that report, the reporting entity (the recipient) or another person (also the recipient) is required by a notice under subsection 49(1) to give information or produce a document; the recipient must not disclose to a person (except an AUSTRAC entrusted person, the person who gave the notice or any other person who has given a notice to the recipient under subsection 49(1) in connection with that report): (c) that the recipient is or has been required by a notice under subsection 49(1) to give information or produce a document; or (d) that the information has been given or the document has been produced; or (e) any information from which it could reasonably be inferred that: (i) the recipient had been required under subsection 49(1) to give information or produce a document; or (ii) the information had been given under subsection 49(1); or (iii) the document had been produced under subsection 49(1).
Subsection (10), which is headed "courts or tribunals", provides: Except where it is necessary to do so for the purposes of giving effect to this Act or the Financial Transaction Reports Act 1988, a reporting entity is not to be required to disclose to a court or tribunal information mentioned in subsection (1) or (2).
Subsection (11) prescribes the offences created under the section. Those offences consist of conduct by a person which breaches the requirements imposed on that person by specified subsections. They include subsections (1) and (2), but not subsection (10).
Section 124 is headed "report and information not admissible", and relevantly provides: (1) In any court or tribunal proceedings: (a) none of the following is admissible in evidence: (i) a report given under, or prepared for the purposes of, subsection 41(2); (ii) a copy of such a report; (iii) a document purporting to set out information (including the formation or existence of a suspicion) contained in such a report; (iv) a document given or produced under subsection 49(1), in so far as that subsection relates to a communication under section 41; and (b) evidence is not admissible as to: (i) whether or not a report was prepared for the purposes of subsection 41(2); or (ii) whether or not a report prepared for the purposes of subsection 41(2), or a document purporting to set out information (including the formation or existence of a suspicion) contained in such a report, was given to, or received by, the AUSTRAC CEO; or (iii) whether or not particular information (including the formation or existence of a suspicion) was contained in a report prepared for the purposes of subsection 41(2); or (iv) whether or not particular information (including the formation or existence of a suspicion) was given under subsection 49(1), in so far as that subsection relates to a communication under section 41; or (v) whether or not a particular document was produced under subsection 49(1), in so far as that subsection relates to a communication under section 41.
Sections 123 and 124 may be compared with other provisions of Part 7 which deal with information obtained or generated by AUSTRAC entrusted persons (defined in s 5 as "AUSTRAC information"). In particular, s 134 deals with the use of such information in court or tribunal proceedings. Section 134 goes somewhat further than s 123(10). Not only is a person not to be required to disclose such information to a court or tribunal (sub-paragraph (b)), but they are also not to be required "to produce a document containing AUSTRAC information to a court or tribunal" (sub-paragraph (a)). As with s 123(10), there is an exception where disclosure (and production) is necessary "for the purposes of giving effect to" the Act "or the Financial Transaction Reports Act 1988".
The AUSTRAC CEO has a general power to exempt, by written instrument, a specified person from specified provisions of the Act, or to modify the application of those provisions to that person (s 248(1)). The exemption can be made conditionally (s 248(2)).

Documentary evidence

Bank's corporate constitution: The material before the Court does not reveal when the Bank was established. A copy of its current constitution, adopted in November 2020, was in evidence.
The Bank's objects are: (a) to raise funds by subscription, deposit or otherwise, as authorised by the Corporations Act and the Banking Act 1959 (Cth) (b) to apply the funds in providing financial accommodation subject to the Corporations Act and the Banking Act 1959 (Cth) (c) to encourage savings amongst members, (d) to promote co-operative enterprise; (e) to provide programs and services to members to assist them to meet their financial, economic and social needs; and (f) to promote, encourage and bring about human and social development among individual members and within the larger community within which members work and reside.
Rule 2.2 relevantly provides: Customers Must be Members (1) Subject to Subrule (2) the company may only accept deposits from, or provide financial accommodation to, its members unless the deposits are made by or on behalf of former members prior to the cancellation of all authorities in relation to that membership. (2) Subrule (1) does not apply to the following persons who are not members: … (c) any person or class of persons as determined by the board from time to time in its absolute discretion.
Rules 3.1 to 3.4 deal with membership of the company. Membership is represented by a share in the company called a "member share" which is issued when a person is admitted as a member of the company (r 3.1(3)).
Appendix 2 deals with shares in more detail. Clause A2-D1-2 provides that each member share confers rights: to vote at general meetings; to share in dividends declared by the board; to participate in the distribution of any surplus on winding up; and to redeem the share.
Division 4 (rules 4.1 to 4.4) deals with termination of membership. The member's name may be removed from the register if the share is redeemed. Redemption can occur in one of three ways. Rule 4.2 gives the member, upon withdrawing all deposits and repaying all loans, the right to require the Bank to redeem the member's share. By contrast, rules 4.3 and 4.4 provide for redemption at the instance of the Bank.
Rule 4.3 allows the bank to redeem the member's shares in various specified circumstances. These include where: (a) the member fails to discharge the member's obligations to the company; (b) the member is guilty or suspected of conduct that could reasonably be considered to be detrimental to the company; (c) the member obtains membership by misrepresentation or mistake.
Rule 4.4 is entitled "termination where accounts dormant or membership inactive". It relevantly provides: (2) The board may determine that a member's deposit account(s) is dormant if: (a) the member has not initiated any transactions in relation to any deposit account for at least 12 months before the date of the resolution; and (b) the company has given the member written notice stating that, unless the member gives to the company a written notice within 1 month of the written notice being given by the company stating that the member wishes the account(s) to remain open, the company intends to declare the account(s) dormant, close the account(s) and redeem the member's member share, and (c) the company does not receive a written notice from the member required under Rule 4.4(2)(b). (3) The board may determine a member as inactive if: (a) the member has not had any deposit or other account open with the company for a continuous period of 12 months; and (b) the company has given the member written notice stating that, unless the member gives to the company a written notice within 1 month stating that the member wishes to remain a member of the company, the company intends to redeem the member's share; and (c) the company does not receive a written notice from the member required under Rule 4.4(3)(b). (4) The company may redeem the member's member share on the board's determination under Rule 4.4(2) that a member's deposit account(s) is dormant (a "dormancy declaration") or upon the board's determination under Rule 4.4(3) that the member is inactive (an "inactive declaration"). (5) If the company redeems a person's member share as a result of a dormancy declaration, the person may require the company to reinstate the person's deposit account at any time before the company pays the money in the deposit account in accordance with the relevant unclaimed money legislation. If the person requires the company to reinstate the person's deposit account: (a) the company must reinstate the person's deposit account as soon as practicable; and (b) if the company has redeemed the member's member share - the company must issue a member share to the person and may debit the member's deposit account for the subscription price (if any). …
Code of Practice: The relevant version of the Code of Practice commenced on 1 January 2018. It is expressed as applying to pre-existing subscribers from that date, or later subscribers from the date of subscription. The Bank's Product Guide (which applies to both accounts in question, see below) contains a statement that the Bank voluntarily subscribes to the Code. There was no suggestion that the Bank has ceased that subscription.
Part B of the Code deals with preliminary matters, including its application. The part relevantly provides: Commitment to comply with Code We undertake to comply with this Code in our dealings with you. We will incorporate this Code by reference in our written Terms and Conditions for products and facilities to which the Code applies. We will ensure we do this within six months of the commencement date of this Code; or, if we subscribe to this Code after its commencement, within six months of the date on which we first subscribe. Relationship to law We will comply with this Code to the extent that applicable Commonwealth and State and Territory laws permit. If we would have to breach our statutory or common law obligations to comply with an aspect of the Code, we will not be able to comply with it. This Code cannot, and does not purport to, limit any statutory or common law obligation we may have.
Part C of the Code list "10 Key Promises" made to customers. These relevantly include: We will be fair and ethical in our dealings with you We will always act honestly and with integrity, and will treat you fairly and reasonably in all our dealings with you. … We will deliver high customer service and standards We will issue and distribute products and provide services that are useful, reliable and of value to our customers. We will make sure our staff and agents or representatives are well trained. We will promote secure and reliable banking and financial services, and keep you up to date on any changes to the products and services we provide to you. We will treat your personal information as private and confidential. … We will recognise our impact on the wider community The customer owned banking sector has a strong community focus. We will take account of the impact of our operations on staff, the communities we serve and our customers. We will promote community engagement and will contribute to community activities and projects. We will support and promote the Customer Owned Banking Code of Practice We will promote the Customer Owned Banking Code of Practice, ensure that our staff is trained to put it into practice, and support its monitoring and effectiveness. The promises are described as: general principles or values applying to our customers, as well as the broader community. Where they overlap, these principles should be interpreted by reference to the more specific and detailed commitments of [Part D].
Part D, which is headed "delivering on our promises", contains 24 clauses dealing with the banker-customer relationship in more detail. Clause 4 is headed "fair terms and conditions", and provides: 4.1. The standard Terms and Conditions applying to our products and facilities will be: • clear, unambiguous, and not misleading • distinct from our advertising and promotional material • written in a plain language style, and legibly presented. 4.2. Our standard Terms and Conditions will be consistent with this Code and will strike a fair balance between: • your legitimate needs and interests as our customer, and • our interests and obligations, including our prudential obligations. 4.3. We will not adopt standard Terms and Conditions that you are unlikely to be able to comply with. 4.4. This section: • is not intended to limit our right to determine the pricing of our products and facilities on a commercial basis • only applies to standard Terms and Conditions entered into after the Commencement Date of this Code (see Part A - Introduction).
I was also referred to clause 22, which is headed "closing your account", and provides: 22.1. If you ask us to close your account, we will do so as long as you have discharged all of your obligations under the applicable Terms and Conditions and any mortgage or other similar arrangements relating to the account. We may require that you put your request in writing. 22.2. We will provide you with a payout figure for your loan or credit facility within 7 business days, if you request this. 22.3. Unless there are exceptional circumstances, we will give you at least 14 days advance notice before closing your account when the standard Terms and Conditions of the account permit us to do so (i.e. in circumstances where you have not sought to close the account yourself). We will notify you at the last postal or electronic address you have given us, or by other legally permissible means.
Terms & conditions: Human Appeal has two accounts with the Bank. The first is a "Community Account". This is an ordinary transactional account. Funds can be deposited into and withdrawn from it. The second is a "Visa Debit Account". As the name suggests, withdrawals can be made from it by way of Visa-branded debit cards issued to the customer. Human Appeal has a single member share in the Bank which covers both accounts.
The parties agreed that the terms and conditions which applied to both accounts were set out in a brochure issued by the Bank, named the "Product Guide". The Product Guide in evidence took effect in March 2021. It has four parts. Part A (clauses 1-11) deals generally with the banker-customer relationship. Part B (clauses 12-25) identifies the various accounts offered by the Bank and contains terms applicable to those accounts. Part C (clauses 26-36) concerns products and services offered by the Bank which allow access to the customer's accounts. These are referred to as "Access Products" and include cheque books and internet banking, as well as debit cards. Clauses 37 and 38, although not identified as a separate part, contain interpretation provisions which are plainly intended to apply generally.
Clause 3 of the Product Guide provides that the document contains the terms and conditions for accounts and Access Products, along with terms in the "Fees & Charges booklet". The Bank has an express right to vary the terms and conditions (clause 5).
Clause 7 provides: Requirements Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) You acknowledge and agree that: ▪ We may be required to obtain additional information from you where required by any law in Australia or any other country. ▪ We may disclose any information which you provide to us or any other information where required by any law in Australia or any other country. ▪ We may delay or block any transaction, or refuse to make a payment, without incurring any liability if we believe, on reasonable grounds, that making a payment may breach any law in Australia or any other country. ▪ Unless you have disclosed to us that you are acting in the capacity of a trustee or on behalf of another party, you warrant that you are acting on your own behalf in entering into this agreement. ▪ You will not initiate, engage in or effect a transaction or payment that may breach any law in Australia or any other country. If you do so, you hereby indemnify us against any loss arising from such transaction or payment.
Clause 8 deals with Codes of Practice. It relevantly provides: We voluntarily subscribe to the Customer Owned Banking Code of Practice (COBCOP), the industry code of COBA - Customer Owned Banking Association, the association of mutual banks, building societies and credit unions. The COBCOP establishes higher standards than the law requires in a range of areas, and addresses issues not addressed by the law. The relevant provisions of the COBCOP apply to all of our products and services. A copy of the COBCOP is available upon request or on our website.
Clause 12 is headed "becoming a customer". Clause 12.1 relevantly provides: When you open an account with us for the first time, you will be issued with one share in Beyond Bank Australia and become a part owner of the bank. If you close all your accounts, your share will be redeemed and the subscription price (if any) will be refunded. The current subscription price for new customer shares is $0.00.
Clause 38, which is headed "inconsistencies", provides: A clause in these terms and conditions does not apply to the extent that it is inconsistent with or contrary to any applicable law or code of practice to which we have subscribed. If those laws would make a clause illegal, void or unenforceable or impose an obligation or liability which is prohibited by those laws or that code, the clause is to be read as if it were varied to the extent necessary to comply with those laws or that code or, if necessary, omitted.
Clause 25, which appears in Part B, is headed "closing accounts and memberships". It relevantly provides: If you wish to close an account, you may request this in writing or by completing a form available at any branch. If you do not have at least one active account or loan account with us, your membership may be terminated. … We may, at any time, close any of your Accounts by giving you 20 days written notice. The notice does not have to specify the reasons for the closure. Additionally, we may restrict access to, or close any of your Accounts at any time, without providing notice to you: - for security reasons; - if we consider your or any signatory's use of the Account is objectionable or inappropriate; - if you have insufficient funds in your Account; - if the Account becomes dormant; or - if you breach these terms and conditions.
Clause 28.2 deals the cancellation of Access Products. It relevantly provides: … We may cancel an Access Product, or your or any signatory's access to an Access Product, at any time without providing notice to you: ▪ for security reasons; ▪ if we consider your or any signatory's use of the Access Product is objectionable or inappropriate; ▪ if you have insufficient funds in your account; ▪ if the Access Product becomes inactive; or ▪ if you breach these terms and conditions. We may, at any time, cancel an Access Product, or your or any signatory's access to an Access Product, for any other reason by giving you 20 days written notice. The notice does not have to specify the reasons for the cancellation. Your or any signatory's access to an Access Product will be terminated when: ▪ we notify you that your access has been cancelled or ▪ your account with us has been closed; ▪ you close the last of your accounts with us; ▪ you cease to be our customer; or ▪ you alter the authorities governing the use of your account or accounts (unless we agree otherwise). You will be liable for any transactions made by you or any signatory using an Access Product before the Access Product is cancelled that are not posted to your Account until after cancellation of the Access Product.
The types of account described in the Product Guide include Human Appeal's Community Account. There is no doubt that the termination provisions in clause 25 apply to such an account.
The position is less clear for Human Appeal's Visa Debit Account. The evidence shows that it was a separate account with its own account number and its own balance. But the Product Guide describes a Visa debit card as a means of access to accounts operated by the customer (referred to as "linked" accounts), rather than an account in itself, and does not identify any Visa Debit Account among the other accounts offered by the Bank. It is therefore uncertain whether the termination of such an account involved the exercise of the bank's powers under clause 25 or under clause 28.2. But no point was taken about this, and it was not suggested that anything turned on any differences in wording between the clauses.
Termination correspondence: The termination of Human Appeal's banking facilities was purportedly effected by notice in the form of an email sent by the bank on 11 August 2021. At the time, Human Appeal's Community Account was around $6.1 million in credit, and its Visa Debit Account was around $13,600 in credit.
The email relevantly stated: … I am writing to you to advise that Beyond Bank Australia are requesting the closure of your accounts held with the bank for Human Appeal International Australia. A recent review was conducted and as a result the bank has concluded that your banking business is not suited to Beyond Bank and therefore, we will exercise our right to close all of your banking facilities under membership XXXXXXXX, with effect from close of business 20/8/2021. I am not in a position to provide any further information as to why your banking business is not suited to Beyond Bank. We ask that you make immediate arrangements to transfer your account balances from Beyond Bank to another financial institution. If there are any monies remaining in your accounts at close of business on 20/8/2021 a cheque for the remaining balance will be mailed to your postal address. If you are able to respond via email to confirm your arrangements and that the date above will be achievable to have your accounts cleared, and if necessary, we can discuss by phone the logistics of this transfer, but as I said above I will not be able to go into any more details.
Human Appeal responded to this email through a letter written by its lawyers, dated 17 August: … Our client is unaware of any matter, fact, or circumstance that is capable of justifying the closure of the facilities. Our client is conscious of Beyond Bank's discretion under the terms and conditions to close any bank account on the basis there is an appropriate reason to do so. However, to date, Beyond Bank has not yet furnished our client with an appropriate reason to justify the closure of the bank accounts. With respect, we do not understand the decision or how it is consistent with a financial institution's duties of good faith and fair dealing. Although our client is disappointed with the decision, it is grateful for Beyond Bank's services and support since the formation of the banking relationship. Moving forward, it is clear that our client is required to make further banking arrangements with alternative financial institutions to allow them to continue their day to day operations. On our instructions, this process ordinarily takes between 4 to 6 months to complete. The current period provided for by Beyond Bank is insufficient and unreasonable. Accordingly, we respectfully request that the date upon which the facilities under membership numbers XXXXXXXXX will be closed (20 August 2021) be extended up until 18 February 2022. This will facilitate an orderly and smooth transition of our client's banking facilities to an alternative financial institution, with minimal disruption to their business and operations. Given the urgency, please provide us with a response in respect of this proposal by no later than 12:00pm, 18 August 2021. Our client otherwise reserves its rights. In the interim, should you have any queries please do not hesitate to contact the writer.
Beyond Bank responded by a letter dated the following day, signed by Mr Raymond O'Brien, Chief Risk Officer: … Regarding account closures and providing a reason for account closures, we draw your attention to Beyond Bank's Product Guide which states in Section 25 - Closing Accounts and Memberships; ' We may, at any time, close any of your Accounts by giving you 20 days written notice. The notice does not have to specify the reasons for the closure.' As a banking institution we fully understand the length of time it takes to establish accounts with a new financial institution. As a result, we are prepared to extend our account closure deadline to the 30 September 2021. We are of the opinion that this is a reasonable timeframe to allow your client to make a smooth and orderly transition to a new financial institution.
The letter went on to ask for Human Appeal's acknowledgement of the revised deadline of 30 September. As already noted, Human Appeal commenced these proceedings instead and the facilities have been extended until further order of the Court.

Notice to produce

By a notice to produce for inspection issued in late April this year, Human Appeal sought production by the Bank of documents relating to its decision to terminate Human Appeal's facilities. The notice sought production of all documents "recording the reason or reasons, rationale and considerations for", "recording [any] information taken into account by [the Bank] in", or "relevant to", that decision.
In response, the Bank produced: 1. bank statements of the two accounts until the end of July 2021 (with some redactions). 2. two template letters headed "Notification of Account Closure". 3. the August 2021 correspondence concerning termination, which I have described above.
A notice to produce for inspection operates as between the parties and does not require production to the Court (see [74] below). The documents in question were produced under cover of emails from the Bank's solicitors. So far as the evidence goes, there was no disclosure of the existence of any other documents, nor was any time sought for further compliance. The implication would have been that the documents produced were the only documents which the Bank possessed which answered the description in the notice.
On the face of it, this was surprising. Presumably the email notice of 11 August represented a considered decision on the part of the Bank. The email itself referred to a prior "review". Yet no record of the review, nor of the decision, was produced. But however surprising it might have been, the Bank clearly appeared to be saying that neither the decision, nor the prior review, had left any documents in its possession.
But at the hearing on 30 August, the Bank's position became less clear. In opening, senior counsel for Human Appeal had pointed to the lack of substantive response to the notice, and had foreshadowed a submission that an adverse inference should be drawn against the Bank under the principles in Jones v Dunkel (1959) 101 CLR 298. In his response, senior counsel for the Bank foreshadowed a submission that no such inference would arise. Senior counsel suggested, among other things, that this was because disclosure of the Bank's reasons, if attributable to the Bank's obligations under the Commonwealth Act, would fall foul of the Act.
When I asked whether this meant there were in fact other documents caught by the notice which had not been produced, senior counsel responded that the notice had been complied with "in accordance with [the Bank's] statutory obligations". When I pressed senior counsel, he indicated that, on his understanding, the Commonwealth Act prevented the Bank even from saying whether or not there were additional documents caught by the notice which had not been produced.
The Bank, however, did not formally revisit its answer to the notice. On the record, the position remained that there were no other documents to produce.
I found all of this somewhat troubling. I was left with the impression that the Bank might unjustifiably have withheld disclosure of documents caught by the notice. In particular, some of the arguments by counsel for the Bank suggested to me that the Bank might have misapprehended the scope of the prohibitions in the Commonwealth Act. These observations, and those which follow, are, however, tentative, because the adequacy of the Bank's response to the notice was not formally raised as an issue in the proceedings before me.
I have set out the relevant provisions of the Commonwealth Act above. Counsel for the parties referred to both s 123 and s 124. But s 124 deals with the admissibility of evidence in court or tribunal proceedings. That issue is to be distinguished from pre-trial production of documents: see Northern Territory v GPAO (1999) 196 CLR 553 at [16], [199]. The relevant enactment is therefore s 123.
There are a number of potentially relevant subsections within s 123. On their face, subsections (1) and (2) prevent disclosure of the information protected by them to another person, such as a party to court proceedings. They do not, however, appear to prevent disclosure to a court. It is well established that, absent contrary intention, a reference to a "person" will not include a court: Kizon v Palmer (1997) 72 FCR 409 at 430-431.
Moreover, s 123 contains a separate subsection (s 123(10)) which is expressly concerned with the disclosure, to a court or tribunal, of information in subsections (1) or (2). Subsection (10), unlike other subsections in s 123, does not define a situation where subsection (1) does not apply - that is, it is not to be understood as an exception to subsections (1) or (2), but as a stand-alone provision. Subsection (10) is also not referred to in the offence-creating provision (s 123(11)).
In the case of a notice to produce to court or a subpoena, it seems clear that subsection (10) would be the applicable one. A complication in the present case is that Human Appeal issued a notice to produce for inspection. Although such a notice makes production compulsory, it only need be done inter partes. It is arguable then that 123(10) does not directly apply to such a notice, and that subsections (1) and (2) apply instead (but subsection (10) may apply at a later point: see [80] below).
Even if subsection (10) applied to the notice in the current case, that subsection applies by reference to "information mentioned in" subsections (1) and (2). The main purpose of subsections (1) and (2) is, as the title of s 123 suggests, to prevent those involved in transactions subject to the Act from being tipped off about AUSTRAC's involvement or potential involvement. The focus is on reports made, or required to be made, to AUSTRAC, and follow-up enquiries made by AUSTRAC.
In this context, I do not read subsections (1) and (2) as preventing disclosure, in general terms, of the administrative burden that the Commonwealth Act, together with other reporting obligations, imposes on a reporting entity. I find it difficult to accept that, if in fact the Bank decided to terminate Human Appeal's banking facilities because of that administrative burden, none of the documents produced in the review, and none of the records recording the decision, could be disclosed at all, even in partially redacted form. Nor was there any evidence that, if the terms of the Act did prevent disclosure, partial or total, the CEO of AUSTRAC had been asked (under s 248) to modify its application, so as to permit such disclosure.
The Bank's stance also raises procedural questions. Counsel appeared to be suggesting that the Bank might have considered that there were documents caught by the Act and that it might have gone on to withhold those documents from production without making any disclosure that it had done so. The implication appeared to be that this would have been legitimate. I am not at all sure that that is so.
Had Human Appeal issued a subpoena or a notice to produce to court in the present case, any documents specified therein which contained information caught by s 123(1)-(2) would have been "privileged documents" (see the definitions of "privileged document", and "privileged information" (especially paragraph (h)) in the Dictionary to the Uniform Civil Procedure Rules 2005) for the purposes of UCPR r 1.9. That rule provides that "if a document is produced, and a person objects to the production of the document on the ground that the document is a privileged document, access to the document must not be granted unless and until the objection is overruled" (r 1.9(4A)). In order to rule on the objection, evidence can be received by affidavit or otherwise (r 1.9(5)(a)), and "in the case of an objection to the production of a document, the person objecting may be compelled to produce the document" (r 1.9(5)(c)).
The position for an inter partes notice to produce is more complicated. The relevant UCPR provisions are rr 21.09-21.11. They relevantly provide: 21.9 Definitions (1) In this Division - notice to produce means a notice to produce referred to in rule 21.10. party A means a party to whom another party is producing, or being asked to produce, documents or things for inspection. party B means a party who is producing, or being asked to produce, documents or things for inspection. (2) For the purposes of this Division, a document or thing is to be taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or thing would be admissible in evidence. 21.10 Notice to produce for inspection by parties (1) Party A may, by notice served on party B, require party B to produce for inspection by party A - (a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and (b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue. … 21.11 Production under notice to produce (1) Unless the court orders otherwise, party B must, within a reasonable time after being served with a notice to produce - (a) produce for party A's inspection such of the documents or things referred to in the notice (other than privileged documents) as are in party B's possession, and (b) serve on party A, in respect of any document that is not produced, a notice stating - (i) that the document is a privileged document, or (ii) that the document is, to the best of party B's knowledge, information and belief, in the possession of a person identified in the notice, or (iii) that party B has no knowledge, information or belief as to the existence or whereabouts of the document. …
In Crawford v Crawford (No 4) [2016] NSWSC 910 at [12]-[13], Stevenson J expressed the view that a privileged document does not, under the language of the rule, have to be produced. Nevertheless, as r 21.11(1)(b) expressly provides, there is still an obligation to disclose the existence of the document and the fact that a claim for privilege is being made. His Honour also assumed that any challenge to the claim would be dealt with by the Court, and could involve, if necessary, the Court inspecting the document for itself (which would plainly bring s 123(10) into play).
I suppose an argument might be devised that s 123 implicitly overrides the provisions of the rules to which I have referred and excludes any role for the court in determining whether the Act applies (cf Kizon at 444-447). Any such argument would however have to address the scope of the exception in subsection (10) for disclosure "necessary for the purpose of giving effect to" the Act (the existence of s 94 would be relevant here: it must have been supposed by Parliament that the scope of the defence created by that section could give rise to contestable issues about the scope of pre-trial production in proceedings between reporting entity and customer).
The observations by counsel for the Bank did not descend to this level of detail, and it is not necessary to consider the possible arguments and counter-arguments. On any view, it is hard to see how total non-disclosure by the Bank could have been justified.
As already noted, it is troubling to think that this case might have to be decided in circumstances where not all of the relevant documents have been produced to the Court. But for practical purposes this is a matter for the Bank and its legal representatives. All that the Court (and the legal representatives for Human Appeal) can do is to proceed on the basis of what the Bank has actually produced in answer to the notice.

Witness evidence

Mr Mohamed Razeen, Human Appeal's Financial Manager, gave affidavit evidence (dated September 2021) and was briefly cross-examined.
According to Mr Razeen, Human Appeal's work "involves trying to improve and relieve the effects of poverty and social injustice", with a particular focus on developing countries. Mr Razeen also referred to work directed to "some of the most poverty, war-torn and needy places in the world".
Mr Razeen gave evidence of Human Appeal's financing. Human Appeal uses its account with the Bank to receive donations. Roughly 4,000 people donate every fortnight by direct debit, with their donations totalling around $200,000 each fortnight. Other fundraising means include: campaign/fundraising drives (online, in person, or by telephone); project based fundraising (involving a monthly commitment, by direct debit); cash donations to offices or donation checkpoints - these are recorded, bundled and deposited from time to time, with bank agreement.
Mr Razeen referred to an "orphan sponsorship program", as an example of project based fundraising. Donors commit to make a monthly gift to sponsor an orphan until their 18th birthday (but some continue to sponsor them beyond this point, usually until they are self-sufficient). According to Mr Razeen, 8,000 orphans are currently sponsored.
Mr Razeen gave the following evidence about the purpose and use of the accounts with the Bank: These Facilities are transaction accounts. The purpose of the Community Account was solely for the deposit of donations sourced from donors within Australia and to meet HAIA's Australian commitments. Once these donations are received, HAIA would transfer the funds required for its projects internationally into an account held by StoneX Financial Pty Ltd, a third-party international remittance payment provider. It does not utilise any international banking services of Beyond Bank. All transactions made with the Facilities and the accounts associated with the Facilities are Australian bank to bank transfers.
According to Mr Razeen, there were discussions between Human Appeal and the Bank about the best way for Human Appeal to deposit cash collections. Mr Razeen exhibited an email from Mr Nicholas Winstone, Community Development Manager at the Bank, dated 7 June 2021. According to Mr Razeen, the email set out an agreement, which was the product of the earlier discussions.
In that email, Mr Winstone referred to himself, "Sue and Alex" (other staff of the Bank, copied in the email) having "confirmed the below plan", and noted that it could be continually assessed and altered based on Human Appeal's feedback. Under the heading "What we know", Mr Winstone set out that: there are three major campaigns for cash (with details, dates, and whether cash only or coins and cash); that large coin deposits are only required for two main campaigns; that Human Appeal has its own coin counting machine; that Human Appeal, at the time, had around $30,000 in coins to deposit.
Mr Winstone then set out an "Agreed Plan" under the headings of "Coin Deposit Strategy" and "Cash Deposit Strategy". Human Appeal was to contact the Parramatta Branch of the Bank at least one day before visiting to deposit coins or at least $20,000 in cash. Coin deposits were not to exceed $5000 per week (and there were other procedural steps for coin deposits). Human Appeal was to count coin deposits in advance, and know (approximately) the value of cash deposits in advance.
Mr Razeen replied to Mr Winstone's email on the same day. He indicated, "[w]e will deposit the coins as per below email".
The Bank relied upon an affidavit of its Chief Risk Officer, Mr O'Brien, the author of the letter of 18 August 2021 (see [61] above). The affidavit had been made in February this year, for the purposes of the application before Slattery J.
Mr O'Brien gave some general evidence about the nature of the Bank's operations. This included that the Bank: - Is an unlisted, customer-owned mutual bank, providing personal, business and community banking services (i.e. to not-for-profit and community organisations) as well as wealth management and financial planning. - Is registered with the Australian Prudential Regulation Authority (APRA) as an Authorised Deposit-taking Institution (ADI). - Is a certified B Corporation (overseen by B Lab, a not-for-profit organisation which oversees the B Corp movement) as a result of its rating according to accountability, transparency, social performance and environmental performance. - Provides fundraising for community organisations through Community Reward Accounts, where customers can raise money for nominated not for profit community entities by holding their savings with Beyond Bank. - Operates the Beyond Bank Foundation, which provides disaster relief for customers affected by bushfire, floods and other natural disasters.
According to Mr O'Brien, during the 2021/22 financial year, the Bank: "[c]ontributed over $630,000 to not-for-profit organisations through the Community Reward program"; "[r]aised over $278,000 for 16 nominated charities"; invested over $1.3 million "in local communities" through the "Beyond Bank Foundation and Community Development Investments Program"; and recorded a net profit, after tax, of $35.5 million, which the Bank re-invests into its business, "supporting investments in services, products and technology and consolidating its capital position".
Part of Mr O'Brien's evidence was directed to the Bank's costs of continuing to provide financial services to Human Appeal (pursuant to the injunction in place).
According to Mr O'Brien, as a mutual authorised deposit-taking institution (ADI), the Bank (along with its members) is "disproportionately affected by unnecessary costs". Mr O'Brien went on to describe aspects of the operations of mutual ADIs in Australia. These included that: mutual ADIs in Australia have to generate profit to meet their need for working capital and to meet prudential capital requirements (there are minimum rates of such capital as a percentage of risk weighted assets - the main asset being loans); mutual ADIs have historically been limited to generating prudential capital through returned earnings (whereas listed banks can rely on ordinary share capital as well); shares offered by credit unions (mostly referred to as customer owned banks) are treated in law as debt rather than equity, and are not counted towards prudential capital; consequently, "any unnecessary or excessive costs" have "a significantly disproportionate impact on" servicing "current and future members due to the impact on capital"; mutual ADIs "face considerable constraints on the costs they are willing and able to meet .. to provide banking services to its members", where the provision of a service to one member at a disproportionate cost, is detrimental to other members - Mr O'Brien described this as the "sense of equity that is at the core of the mutual ADI". All of this evidence was rather conclusory but probably uncontentious so far as it went. Objection was taken but not pressed after I indicated that I would receive it for what it was worth.
Mr O'Brien referred to the Bank's obligations under the Commonwealth Act. He stated that "staff" of the Bank compile management reports which are provided to the Chief Risk Officer and the Board, and that the reports involve the extraction of "data" from the Bank's systems, and commentary on the "data" and the "results". He did not go into further detail.
Mr O'Brien then gave the following evidence, which was objected to by counsel for Human Appeal: [12] A significant amount of time (20 weeks over the past two years) is taken up by the Defendant's Financial Crimes Team (which, in 2021 comprised four analysts and one Senior Manager) actively reviewing and managing The Plaintiff's accounts on a daily basis. [13] The need to continuously monitor the large number of transactions in and out of The Plaintiff's account has removed resources from other important monitoring activities performed by the Defendant including police requests and fraud and scam mitigation work. Scams have increased significantly and the diversion of resources has impacted upon the Defendant's ability to identify and prevent scam and fraud activity. This has a detrimental effect on all other members of the Defendant. [14] On average, the Defendant's staff spend at least one hour per day on the review of transactions undertaken by The Plaintiff, due to the complexity and volume of transactions, which is significantly higher than other Bank customers.
The relevance of this evidence to the issues in these proceedings is questionable. Evidently, it was prepared for the purpose of arguing, in the context of the application dealt with by Slattery J, that, given the delay by Human Appeal in prosecuting the proceedings, the balance of convenience favoured the dismissal of the proceedings, rather than giving Human Appeal a further opportunity to continue to prosecute them. Although the evidence referred to the proceedings going back two years, that is to February 2021, the focus was on the ongoing effect on the Bank of having to provide banking facilities for Human Appeal. It was not on the decision to terminate Human Appeal's banking facilities in August 2021. Indeed, Mr O'Brien's affidavit did not say that the decision to terminate those banking facilities was taken because of the administrative burden on the Bank of monitoring Human Appeal's bank accounts. It did not even identify who the decision-maker was. It did not refer to the decision at all.
Counsel for the Bank invited me to infer, despite Mr O'Brien's failure to say so, that the cost of monitoring the Bank accounts was the reason for the decision to terminate. I see little attraction in this submission. If this is correct, then the Bank could have readily put on evidence to prove it directly. But I am not sure whether it would be a justification for termination in any event. Mr O'Brien asserted that the need to monitor Human Appeal's account had taken up a great deal of time of the Financial Crimes Team and that this was significantly higher than that of other bank customers. What he did not say was that this administrative burden required the Bank to put on further staff, or to incur extra staffing expenses, or that it distracted the staff from performing other necessary functions. It is therefore difficult to see that the monitoring task has imposed any financial cost on the Bank.
In the end, however, it was not necessary to rule finally on the relevance of the evidence. There were clear deficiencies in its form. It was evident from Mr O'Brien's affidavit that the statements he made about the effect on the Financial Crimes Team were not based on personal observation. The Team reported to Mr O'Brien, but he was not a member of it. The statements made by Mr O'Brien must therefore have been derived from oral or written statements, that were provided to him by the Senior Manager in charge of the Team, or directly from members of it. If they were derived from written reports, then those reports would have been business records, which could, and should, have been tendered. If they were derived from oral reports, then, coming from Mr O'Brien, those reports were hearsay. Mr O'Brien's evidence was thus a conclusion based on undisclosed primary factual material.
For this reason, I rejected the evidence as bad in form. Counsel for the Bank then sought leave to adduce the evidence in proper form. But I considered that the application came too late. Putting the evidence in proper form might well have given rise to further factual enquiries and requests for the production of documents. It was not reasonable to expect counsel for Human Appeal to deal with this on the run.

Validity of termination

In the proceedings before Slattery J, counsel for the Bank foreshadowed a dispute about the termination of Human Appeal's banking facilities being subject to an obligation of good faith or reasonableness. The issue remained a live one during the course of the opening on 30 August and in the written supplementary submissions filed for the Bank in advance of the closing arguments on 6 September.
In their submissions, counsel for the Bank emphasised two authorities in particular. The first was the decision of the English Court of Appeal in Joachimson v Swiss Bank Corporation [1921] 3 KB 110. In that case, Atkin LJ summarised the terms of the contract between banker and customer. His Lordship stated that the Bank had the right to terminate the contract, subject to allowing sufficient time for outstanding transactions to be processed (at 127). Counsel submitted that this statement has since been understood as an exhaustive one, which excluded the possibility of any restriction based on good faith or reasonableness.
In counsel's submission, this understanding was correct. It was said to be consistent with the decision of the House of Lords in Foley v Hill (1848) 2 HL Cas 28, which laid down that, in the absence of some specific undertaking, the banker-customer relationship is not a fiduciary one. More recent authority in Canada was said to reinforce the view that the termination of a banking contract is not generally subject to obligations of good faith or reasonableness: RCG Forex Service Corp v HSBC Bank Canada 2011 BCSC 315; International Relief Fund for the Afflicted and Needy (Canada) v Canadian Imperial Bank of Commerce 2013 ONSC 4612.
The second authority emphasised by counsel was the decision of Foster J in Sundararajah v Teachers Federation Health Limited [2011] FCA 1031. The case concerned a health fund which provided benefits to members covering health services provided to them. Accredited providers could be supplied with electronic point of sale equipment which allowed a member's benefit to be paid directly to the provider, leaving the member to pay only the difference between the benefit and the amount charged by the provider. It was obviously beneficial for a provider to be able to offer the service.
What happened was that the plaintiff, who was a dentist, obtained such equipment by entering into a contract with the fund. The fund later terminated the arrangement by exercising a power of termination in the contract, which did not require any reasons to be given. The plaintiff challenged the termination, contending that the fund had obligations of good faith and fair dealing which prevented termination without proper commercial justification. This contention was rejected by Foster J: see at [62]-[71].
In response, counsel for Human Appeal submitted that the world had moved on. Counsel referred me to the following statement from the Supreme Court of Arizona, as long ago as 1937 (Stewart v Phoenix National Bank (1937) 49 Ariz. 34 at 45): It may have been that generations ago when most commercial transactions were for cash, or at least consisted merely of personal obligations between vendor and purchaser, and the highly complicated modern structure of credit and corporate securities did not exist, that banks, which were originally merely places of security where a man might deposit his cash and valuables, did not, as such, hold any greater confidential relations with their clients than those between any other two businesses. But times have changed. It is almost inconceivable that any man should engage in financial transactions of any magnitude in the modern time without having recourse to some bank not only as a place of safety to keep his money, but as a place where he might secure loans to conduct his business. It is notorious that modern banks, before they make a loan of any extent, make a rigid investigation of the business of their customer, and even the purpose for which the loan is to be used, basing their action thereon. It is equally notorious that in many, if not most, cases an investor will consult his bank before committing himself, believing that he has the right to rely upon the advice of its officers as being given in good faith. It has even become a common, if not practically a universal, practice, for banks to advertise that they are desirous to perform many services always held to be confidential in their nature, such as trustee, executor, administrator and the like, for all who care to do business with them.
In the same vein, counsel referred to more recent comments by Allsop CJ about the importance of banking in commerce in ASIC v Australia and New Zealand Banking Corporation Ltd (No 3) [2020] FCA 1421. His Honour observed (at [13]) that: The importance of the banking system in Australian social and commercial life need only be stated. Reliance by customers on the integrity and good faith of their bank is at the heart of social and commercial life in this country. It is highlighted in general life from advertising by banks and by community expectations. Despite all other features, the banker and customer relationship is at the heart of the economic system. It is a relationship based on contract, but, as the Code of Banking Practice reveals, it is founded on trust and good faith in a commercial sense. Counsel also referred to the citation of those observations, with approval, by Derrington J in ASIC v National Australia Bank Ltd [2022] FCA 1324 at [307].
Counsel for Human Appeal submitted that, if there had ever been any limitation on applying the principles of good faith and reasonableness to a bank's decision to terminate its accounts with a customer, that limitation should be discarded. Indeed, counsel appeared to go so far as to contend that the relationship of banker and customer, while not fiduciary, was of itself a relationship of "good faith".
In the end, however, it did not prove necessary to go into this debate in any depth. In the course of closing argument on 6 September, in answer to a question from me, counsel for the Bank conceded that the Bank was only entitled to terminate Human Appeal's banking facilities if it had "a valid commercial reason" for doing so. The real question, according to counsel, was whether it had been established that, in fact, the Bank lacked a valid commercial reason to close Human Appeal's accounts.
The existence of an obligation to exercise contractual powers in good faith (and, it is sometimes added, reasonably) is well recognised. In the leading authorities in this State, it is seen as deriving from an implication to that effect as a term of the contract. This, of course, would mean that the implication could be excluded by an express term to the contrary. It has been suggested, however, that the implied term analysis is too narrow, and an obligation to act in good faith should be seen as inherent in the doctrines of contract law themselves: see, for example, JW Carter and E Peden, 'Good Faith in Australian Contract Law' (2003) 19 Journal of Contract Law 155.
In view of counsel's concession, it is not necessary to go into this debate. Furthermore, the present case has its own specific factual features.
The Code of Practice, which is expressly incorporated into the Bank's terms and conditions, contains provisions which guide the manner in which the Bank is to act. That effect is seemingly reinforced by clause 38. Although the Code does not use the terms "good faith" or "reasonableness", it uses similar terms (see above at [44]). Thus, there is room to argue that, in the present case, there is a contractual obligation of good faith and reasonableness which is express (or at least which arises from the express terms of the contract rather than by way of stand-alone implication: cf Realestate.com.au Pty Ltd v Hardingham (2022) 296 ALJR 40 at [21] (Kiefel CJ and Gageler J) and [102]-[106] (Edelman and Steward JJ).
I proceed on the basis that this additional fact-specific consideration, and perhaps others, may have informed the concession in the present case. Counsel for the Bank is not to be taken as having accepted that the same is so in every case of banker and customer.
There is a further point which turns on the facts of the present case. Even though Human Appeal has not pursued the contention that the constitution of the Bank itself prevents it from terminating Human Appeal's banking facilities without cause, the constitution is part of the contractual context. It operates as a "statutory contract" binding on both the Bank and Human Appeal (along with the other members of the company): Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 433-436.
Under the Bank's constitution, a customer's member share is potentially valuable property which can only be taken away by the Bank in defined circumstances. Being able to maintain an account with the Bank is, in itself, a valuable right because it makes it harder for the share to be taken away. Furthermore, the provisions of rule 4.4, in particular sub-rules (2), (3) and (5), appear to have the effect that a member's bank account cannot be closed without the member's consent, even if the account is not being used. All of this seems difficult to reconcile with the Bank having a discretion to close any customer's account merely upon giving notice, and without cause.
It may therefore be that a customer of the Bank is in a stronger position to resist de-banking than the customer of a commercial bank. But this was not argued, and, having regard to the concession made by the Bank, it need not be furthered discussed in this judgment.
I come now to the question of breach by the Bank. It is common ground that Human Appeal bears the legal onus of proving that the Bank acted without a valid commercial reason. At the same time, however, the circumstances may place an evidentiary onus on the Bank to justify that action.
Counsel for Human Appeal pointed out that no officer of the Bank had given any evidence about its decision to close Human Appeal's accounts. Indeed, the Bank had not even identified who the decision-maker was. Nor had any documents been produced. Counsel invited me to infer that the Bank had no reason for its decision, or at least no reason which would stand scrutiny.
Counsel for the Bank, for their part, submitted that no such inference should be drawn. Essentially, their argument was that to do so would give insufficient weight to the Bank's secrecy obligations.
Counsel for the Bank referred, in particular, to the Commonwealth Act as providing the "context" for the decision to terminate Human Appeal's banking facilities. Counsel acknowledged that there was no evidence before the Court that the decision was associated with the making of a report or reports under the Act. But counsel submitted that, had that been the case, the Bank would have been prevented from giving evidence about it under s 124.
In their submissions, counsel for the Bank referred to the decision of Moshinsky J in Marundrury v Commonwealth Bank of Australia (No 2) [2022] FCA 916. In that case, the plaintiffs were Indonesian nationals. Money was transferred to their accounts held (in Australia) with the defendant bank ("CBA"). The transfers came from members of the plaintiffs' family in Indonesia. The monies were not transferred using conventional interbank channels, but were instead converted into a series of cash deposits in sums less than $10,000. The proceeds were later forfeited, but only after several transfers had been made, involving a significant sum.
The plaintiffs' pleaded case was that CBA breached its obligations to them as customers by failing to comply with its reporting requirements under the Commonwealth Act. The plaintiffs alleged that, had CBA done so, the forfeiture steps would have taken place earlier, and later transfers would have taken place by conventional channels, which would not have been subject to forfeiture.
CBA sought to have the proceedings dismissed as an abuse of process. CBA's argument was that the provisions of ss 123 and 124 of the Commonwealth Act, in effect, prevented it from defending itself against the plaintiffs' claims. Moshinsky J initially deferred the application, to allow CBA to ask the AUSTRAC CEO to dispense with the secrecy provisions, to the extent necessary for it to be able to defend itself. But when the Deputy CEO (to whom CBA's request had been referred) declined to do so, his Honour decided to accede to CBA's application (subject to giving the plaintiffs a further opportunity to amend their pleading).
Counsel referred to the statement of reasons by the Deputy CEO for failing to authorise the legislation to allow for disclosure in that case. In particular, the reasons included the following: AUSTRAC has a longstanding position that disclosing SMRs [suspicious matter reports under s 41 of the Commonwealth Act] in court proceedings is incompatible with the integrity of the AML/CTF regime. By their nature, SMRs are hearsay and subjective evidence of the facts and opinions expressed therein, which makes them incompatible with the nature of legal proceedings and the evidence required for such proceedings. Disclosure of SMRs in one proceeding may reduce the future utility of those SMRs, including informing other law enforcement investigations. Additionally, permitting SMR material to be disclosed and admitted in evidence may infringe the privacy of third parties identifiable in any SMR material disclosed. Modifying section 124 is inconsistent with this position, would undermine the integrity of the AML/CTF regime, and may invite further requests to modify that position. Reporting entities may modify their reporting behaviour if they believe that AUSTRAC may permit the disclosure of SMR material in future legal proceedings. This is likely to result in a reduction in the quality of SMR information received, adversely affecting the quality of the AUSTRAC's intelligence holdings and intelligence products. This would negatively affect the Commonwealth, State and Territory agencies, including law enforcement agencies that under the AML/CFT Act have access to, or use of, that information.
Marundrury (No 2) was a very different case from this one. The claims pleaded by the plaintiffs against CBA directly involved an allegation that CBA had breached its reporting obligations under the Commonwealth Act with respect to specific transactions. In the present case, by contrast, the question of the application of the Act arises only incidentally. It could not be said, and was not contended by counsel for the Bank, that Human Appeal's claim involved an abuse of process.
Counsel for the Bank urged me to consider the issue in the context of all of the evidence, and in particular Mr O'Brien's evidence about the Bank's structures and procedures. For this reason, I have set out that evidence in some detail at [93]-[98] above. But overall, I thought that it was presented at too high a level to answer the specific questions which arise in this case.
I have already pointed out that, if it were truly the case that compliance with the Act (and possibly other prudential requirements) had resulted in disproportionate time being spent by members of the Financial Crimes Team on monitoring Human Appeal's accounts, that would not necessarily have imposed any additional cost on the Bank, and it is therefore questionable whether, of itself, it would have been a valid commercial reason for terminating the banking relationship. But even if additional costs had been incurred, I see no reason why the Bank could not simply have said that that was so, without going into detail about any specific transactions or reports. Indeed, I cannot see why a statement that the Team had been disproportionately engaged in working on Human Appeal's accounts, and that the Bank had not wished to continue to bear that administrative burden (if the Bank had truly reasoned in that way), would fall foul of s 123 (or s 124).
For completeness, I should add that, if I am wrong in my understanding of the width of the Commonwealth Act, there would always be a possibility of the CEO of AUSTRAC modifying the application of the Act, in the present case, to allow the evidence to be given. There is nothing in the record to suggest that the Bank made any request for dispensation, either to allow it to answer the notice to produce, or to conduct its defence at the hearing. Indeed, there is no suggestion that the Bank even considered doing so.
Although counsel referred me to the reasons given for the refusal of such a dispensation in the Marundrury (No 2) case, and I have quoted those reasons above, they are not evidence for the purposes of these proceedings. I certainly am not prepared to infer that if in this case a request had been necessary, and had been made, it would have been refused.
I have already pointed out that Marundrury (No 2) was a very different case. Furthermore, there would be no need for the CEO of AUSTRAC to be concerned in this case (or, with great respect to the author of the Marundrury (No 2) statement of reasons, in any proceedings in which the rules of evidence apply) about the possibility of reports being used to give hearsay evidence about customers' affairs. Such documents, unless deriving from personal knowledge of the reporting entity's officers, would be inadmissible in any event. And (again with respect to the author of the Marundrury (No 2) statement of reasons) the courts can be expected to take whatever steps may be necessary to ensure the confidentiality of evidence which has been received and warrants protection, including by making suppression orders, backed up by the power to impose criminal sanctions for contempt. Documents from the highest level of government, or recording security and intelligence information of the most secret kind, are routinely dealt with in this way.
In these circumstances, I would like to think that the AUSTRAC CEO would recognise the important public interest in the fair conduct and just resolution of court proceedings, and generally exercise his or her powers under the Act accordingly. This would include both facilitating compliance with a subpoena or notice to produce issued by a court, if it called for documents which were found by the court to be privileged under s 123, and facilitating the adducing of potentially relevant evidence at the hearing, if that evidence were covered by s 124.
In summary, the Bank was, from the outset, challenged by Human Appeal as to its reason for terminating the facilities. Initially, the Bank took the position that it was entitled to terminate without having a reason. Belatedly, the Bank raised the alternative argument, that if it was not entitled to terminate without having a reason, it might have had one. I think that such an argument is quintessentially one which attracts an evidentiary onus. How else could it be evaluated by the Court? But the Bank has propounded no admissible evidence in support of it. Instead, the Bank has contented itself with submitting that I should infer that the Commonwealth Act prevented the reason from being put before the Court. I have rejected that submission. I find myself driven to the conclusion that the Bank did not have reasons for termination which would sustain scrutiny. The purported termination was therefore invalid.

Compliance of terms and conditions with Code of Practice

The argument for Human Appeal focused on clause 4.2 of the Code of Practice which I set out again for convenience: Our standard Terms and Conditions will be consistent with this Code and will strike a fair balance between: • your legitimate needs and interests as our customer, and • our interests and obligations, including our prudential obligations.
As a matter of language, clause 4.2 imposes an obligation on the members of COBA which relates to the terms and conditions in those members' contracts with their customers. But that obligation is then picked up by the Bank's acknowledgment in clause 8 of its terms and conditions (see above) that the relevant provisions of the Code "apply" to all of its products and services. On the face of it, therefore, clause 4.2 of the Code forms part of the contract between the Bank and its customers, and obliges the Bank, if the existing terms and conditions do not reflect a "fair balance" of the parties' interests, to adopt revised terms and conditions which do. There is no apparent difficulty with enforcing the obligation by mandatory injunction at the suit of the customer: the Bank is expressly permitted to vary the terms and conditions (clause 5).
It is unusual for the parties to a contract to agree make the reasonableness of their trading terms reviewable in this way. But counsel for the Bank did not argue that it was impermissible as an "agreement to agree". Nor did counsel argue that the fairness of the balance struck by the Bank's terms was not a justiciable issue. I think, therefore, that the Court has no alternative but to decide the issue as best it can.
Counsel for the parties did not refer me to any instance of such an issue being dealt with in a decided case. I must therefore address the question in the present case from first principles.
Counsel for the Bank did refer me to clause 22 of the Code of Practice. I understood their submission to be that, while, in general, clause 4.2 was capable of application to the question of termination, clause 22 dealt with the issue exhaustively. But I do not think that is correct. Clause 22 addresses the situation where termination is permitted under the contract. I think it has nothing to say about the circumstances in which termination should take place.
Of more significance, for present purposes, is the circumstance that the Bank's terms and conditions expressly make provision for the impact of the Act on the conduct of the customer's banking facilities (clause 7, quoted at [50] above). That clause allows the Bank to obtain and disclose customer information in accordance with its obligations under the Act (and otherwise). It also allows the Bank to recover costs incurred as a result of the customer engaging in transactions or payments in breach of the Act. It does not however give the bank power to terminate the customer's banking facilities on that ground.
Returning to the issue of principle, clause 25 of the terms and conditions, on its face, permits termination of the customer's banking facilities without cause and simply upon the giving of 20 days' written notice. The concession by counsel for the Bank that the clause cannot be used unless the Bank actually has a valid commercial reason for termination goes some way to redressing the balance. But the practical value of that concession is limited if, as clause 25 provides, there is no obligation to specify the reason in the notice. That means if a bare termination notice is given, as in this case, the customer has no practical means of finding out the reason for the decision, and challenging it, short of launching legal proceedings.
Such a state of affairs seems to me to be highly un-businesslike. The contractual duty of good faith and fair dealing is closely linked with the contractual duty of cooperation. A cooperative approach to a problem which was causing the Bank to think that it might wish to terminate the customer's account, would be to raise the issue with the customer (to the extent, of course, that this is lawfully possible), so that it may be dealt with in advance. It seems quite illogical, having conceded that a reason must exist, to put the customer in the position where the reason can only be identified once the purported termination has taken place, and the customer has brought legal proceedings about it.
There is a further point. While the Bank now accepts that termination without a valid commercial justification is ineffective, that is not something a customer would appreciate from reading the bare terms of clause 25. It seems to me that this, of itself, is a defect in the terms and conditions for the purposes of clause 4.2 of the Code.
Counsel for the Bank submitted that the fair balancing of interests must take account of the Bank's legal obligations, including its secrecy obligations under the Commonwealth Act. I accept that this is so. Clearly, any obligation to give reasons must be limited to the reasons the Bank may lawfully disclose. But I have already explained why I do not think that this would have been an obstacle to giving at least some explanation in the present case, if the Bank's decision had actually been based on the administrative burden of complying with the Act.
For these reasons, I consider that the termination provision in clause 25 of the terms and conditions does not strike a "fair balance" between the interests of the parties, as required by clause 4.2 of the Code. The Bank will need to modify the provisions to ensure that a fair balance is struck. But how that is to be done seems to me to be a matter for the Bank. As at present advised, I am not sure that I should defer the finalisation of these proceedings until it has happened (indeed I am not sure that I will be asked to do so).

Conclusions and orders

I have concluded that: 1. the purported termination of Human Appeal's banking facilities, notified by letter dated 11 August 2021 was invalid; and 2. the provisions in clause 25 of the terms and conditions, concerning the termination of customer bank accounts, contravene the Bank's obligations (enforceable by Human Appeal as a customer of the Bank) under the Code of Practice.
Ordinarily, the first conclusion would justify an injunction restraining the Bank from giving effect to the purported termination. The second conclusion would justify a mandatory injunction, requiring the Bank to adopt fresh terms and conditions relating to the termination of banking facilities which strike a "fair balance" for the purposes of clause 4.2 of the Code of Practice. But counsel for the Bank submitted that the grant of injunctions would be unnecessary and that I could be confident that if I made declarations reflecting my conclusions, the Bank would act accordingly. I am inclined to accept this approach. But I will give counsel for Human Appeal an opportunity to be heard further on whether further, non-declaratory, relief should be granted.
I will stand the proceedings over for a short time to allow the parties to confer on the terms of the declarations and whether any other orders are necessary to complete the proceedings. The parties should also seek to agree the costs consequence which should follow from my decision. If there is any disagreement, I will hear argument.
The orders of the Court are: 1. Adjourn the proceedings to 29 September 2023 or such other time or date as may be arranged with my Associate. 2. Direct that the parties confer on the form of orders to be made to give effect to this judgment and to deal with the remaining claims in the proceedings, including costs, and, no later than 24 hours before the adjourned hearing, submit proposed orders for this purpose.

Amendments 30 November 2023 - [142] Changed from clause 20 to clause 25 [147] changed from clause 20.1 to clause 25. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 November 2023

Requirements Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (12)

Cited By (1)