Discovery of emails and file notes
42 The second headline issue concerns the discovery of emails by Westpac in respect of the relevant period (being a 10 year period). The applicant seeks discovery of the following two categories of documents:
(a) (Category 6) File notes and emails of the persons responsible for conducting or responding to the investigations, audits, reports, memoranda or summaries referred to in category 5, containing comments, responses or analysis of those investigations, audits, reports, memoranda or summaries.
(b) (Category 7) Emails since 1 July 2009 of the persons who held the positions identified in paragraph 6 of the affidavit of Christopher Prestwich dated 19 June 2020 and persons who were involved in the management or oversight of the Policies (i.e. persons whose job title included manager, leader or coach), relating to:
a. the existence or absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers;
b. the manner in which the Policies were being sold to customers.
43 Category 6 cross-references category 5, which is itself a very broad category. It covers investigations, audits, reports, memoranda, actuarial advice or summaries, dated 1 July 2009 or later, relating to 11 different matters which are the subject of the pleaded allegations. In the ordinary course, it would be expected that there would be a large number of persons responsible for conducting or responding to such matters over the 10 year period covered by the document category. It follows that proposed category 6 would involve a very large discovery task, first to identify all such persons and second to search for file notes and emails of those persons.
44 Category 7 cross-references paragraph 6 of the affidavit of Christopher Prestwich dated 19 June 2020. That affidavit was made in accordance with an order of the Court requiring Westpac to set out the names of any committees (including sub-committees), working groups or teams which managed or governed the Policies in the period since 1 January 2009, as well as the members of the same. Paragraph 6 identifies persons within Westpac from whom Mr Prestwich took instructions in preparing the affidavit and the positions they held. The positions are: Head of Product & Underwriting, General Insurance; CCI Product Manager, General Insurance; Senior Manager, General Insurance; and Senior Manager, GI Actuarial Pricing, General Insurance. However, category 7 is not confined to persons who held those positions over the relevant period. It also extends to any persons who were involved in the management or oversight of the Policies. Again, it would be expected that that includes a significant number of people. It follows that category 7 would also involve a very large discovery task.
45 The applicant submitted that a key allegation in the pleading is that Westpac knew, or ought to have known, the absence of value, benefits or suitability of the Policies to customers, which is denied by Westpac. The applicant argues that, in order to prove the requisite state of mind, it will be necessary to identify individuals within Westpac who held the state of mind, as aggregation of knowledge is generally not permitted: Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 at [64]-[67] (Allsop CJ), [81]-[83] (Besanko J), [118] (Edelman J). The applicant says that email is the primary mode in which bank officers communicate with one another and that it is expected that Westpac will have internal emails on this topic, which can be located relatively easily through targeted searches, and which reveal what was known by relevant individuals within the organisation at the relevant time on the topic of absence of value, benefits and suitability of the Policies. The applicant submitted that documents such as minutes of meetings, policy documents and other summary documents which will be discovered are no substitute for emails because such documents are usually anodyne. It is only emails that will disclose what information was known internally and when and by whom, whether and how information was passed (or not passed) up the internal chain, and what internal considerations there were within Westpac about particular topics (referring to Australian Competition and Consumer Commission v Medibank Private Limited (2018) 267 FCR 544 from [202] as an illustration).
46 The applicant also argued that a key aspect of his case is the flaws in the sales system through which the Policies were arranged for customers. ASIC issued reports, in particular Report 256 published in 2011 which described deficiencies in the sales methods of banks' consumer credit insurance policies, and linked these to the absence of value and benefits associated with the policies. ASIC's continued concerns about these matters prompted Westpac to engage Deloitte to undertake an independent review in relation to the sale of consumer credit insurance policies, resulting in the Deloitte Independent Review dated 8 October 2018. The Independent Review revealed deficiencies in Westpac's sales systems, including as to sales to customers without their consent, insufficient explanation of the exclusions of cover, insufficient explanation that the policy came at a cost, which was separate from the loan and issuing of policies prior to provision of the policy terms to customers. The applicant says that email correspondence between key personnel about the ASIC report, what was or was not done to implement its recommendations, the gaps in compliance, and the flaws in the sales systems, are relevant to show what relevant individuals knew and what if any action they took. The applicant says that these matters are relevant circumstances as part of the enquiry as to whether Westpac engaged in systemic unconscionable conduct.
47 The applicant's submissions proceeded on the basis that it is axiomatic that, in a class action such as the present, the applicant will be entitled to discovery of the respondents' emails. Such an assumption is contrary to s 37M of the FCA Act, r 20.11 of the Rules and the practice notes of the Court. The need for such discovery depends on the issues in dispute and the likely relevance of emails when balanced against other documentary evidence and the likely cost of discovery. The applicant's reliance on Australian Competition and Consumer Commission v Medibank Private Limited (2018) 267 FCR 544 is misplaced. The allegation in that case was that a specific decision made by Medibank was unconscionable, the decision being to terminate certain agreements with pathology and radiology providers which had the effect that members using those providers may incur out-of-pocket expenses, without giving notice to its members. A relevant issue was the reason for Medibank's decision, and emails relating to that issue were discovered. That case is not analogous to the present case.
48 I am not persuaded that discovery categories 6 and 7 proposed by the applicant will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. To the contrary, I consider that proposed discovery categories 6 and 7 are likely to generate very large volumes of irrelevant documents, imposing an excessive and unnecessary cost burden on Westpac giving discovery and on the applicant in reviewing the documents in the hope of finding something relevant to its case. The reasons for that view are as follows.
49 First, the applicant's primary argument in support of the proposed categories is that they are relevant to proving Westpac's state of mind, which in turn is relevant to proof of the unconscionable conduct allegations. In my view, the applicant overstates the significance of its pleaded allegations concerning Westpac's knowledge.
50 As outlined earlier, the applicant's case is based on a number of causes of action, specifically, misleading and deceptive conduct in contravention of s 12DA(1) of the ASIC Act, inappropriate advice in contravention of ss 961B and 961G of the Corporations Act, unconscionable conduct in contravention of s 12CB of the ASIC Act and in restitution on the ground of mistake. The applicant only pleads that Westpac had knowledge of certain facts in connection with the unconscionable conduct claim (apart from uncontroversial pleas that Westpac knew the terms of the Policies and was aware of the ASIC reports referred to in the pleading). In the context of the unconscionable conduct claims, the applicant pleads only that Westpac knew or ought to have known that the Policies had no material value or benefit to customers.
51 In order to understand the applicant's allegation that Westpac knew or ought to have known that the Policies had no material value or benefit to customers, it is necessary to understand the basis of the applicant's pleaded allegation that the Policies had no material value or benefit to customers. In support of that allegation, the applicant relies on five matters, which are objective factual matters, and at least 4 of which are broadly admitted by Westpac (in terms of the objective facts):
(a) the claims ratio for the Policies;
(b) the proportion of claims made under the Policies that were either declined or withdrawn;
(c) Westpac's financial hardship policies for its consumer credit products;
(d) the fact that the applicant and group members held other insurance such as life insurance, disability insurance and income protection insurance; and
(e) the exclusions under the terms of the Policies.
52 Westpac does not admit that the applicant and group members held other insurance such as life insurance, disability insurance and income protection insurance.
53 While Westpac puts in issue the allegation that it knew or ought to have known that the Policies had no material value or benefit to customers, the actual matters in issue between the parties largely concern the question about other insurance products held by customers and the pleaded conclusion: that the five matters relied on by the applicant lead to the conclusion that the Policies had no material value or benefit to customers. The relevant issue is whether proposed discovery categories 6 and 7 are necessary for the just resolution of those issues.
54 Second, the proposed discovery categories other than 6 and 7 are likely to produce relevant documents bearing upon the pleaded allegation of knowledge. In particular:
(a) Category 3 covers meeting papers, minutes and records from the committees, working groups and teams identified in paragraph 10 of the affidavit of Christopher Prestwich dated 19 June 2020, the Independent Review and any equivalent groups, as they relate to the management and oversight of the sale and distribution of the Policies, which relate to, amongst other things, the existence or absence of value, benefits and suitability of the Policies to customers. Paragraph 10 of the affidavit of Christopher Prestwich identified numerous committees and working groups that had management responsibility for the Policies during the relevant period.
(b) Category 5 covers documents in the nature of investigations, audits, reports, memoranda, actuarial advice or summaries dated 1 July 2009 or later relating to, amongst other things, the existence or absence of value, benefits and suitability of the Policies to customers, complaints made in respect of the Policies or ASIC Reports 256, 361 and 622.
(c) Category 8 covers documents provided to Deloitte for the purposes of its Independent Review.
(d) Category 10 covers correspondence and records of meetings with several government, industry and regulatory bodies in respect of, amongst other things, the absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers.
55 Third, when analysed, proposed category 6 seeks documents in the nature of Westpac internal commentary on internal commentary. It seeks file notes and emails of persons conducting or responding to the production of the internal documents referred to in category 5. I reject the applicant's submission that the documents discoverable under category 5 will be anodyne. In my view there is no basis for that submission and it is mere assertion. Category 5 covers a wide range of types of documents, from audits to memoranda. At this stage of the proceeding, I consider that it is inconsistent with the overarching purpose to trawl through internal commentaries on category 5 documents when the applicant does not know what will be revealed by the category 5 documents. I will return to the question whether the applicant may make a more limited application for further discovery depending on what is disclosed by the category 5 documents or any other discovered documents.
56 Fourth, proposed category 7 seeks emails from persons at a management level on two topics: the existence or absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers; and the manner in which the Policies were being sold to customers. I have already addressed the "absence of value and benefits" topic. I do not consider that a general search for emails relating to that topic over a 10 year period from "persons who were involved in the management or oversight of the Policies" is justified having regard to the nature of the pleaded allegations. In relation to the second proposed topic, emails relating to the manner in which the Policies were being sold to customers, many of the other discovery categories are directed to that issue:
(a) Category 2 covers scripts, checklists, training materials, manuals and any other policy/procedure documents of one or more of Westpac or third parties involved in the sale and distribution of the Policies as in force from 1 January 2010 onwards relating to the sale and distribution of the Policies.
(b) Category 3 covers committee, working group and team papers which relate to the sale and distribution of the Policies.
(c) Category 4 covers template customer correspondence in relation to the Policies.
(d) Category 5 covers documents in the nature of investigations, audits, reports, memoranda, actuarial advice or summaries dated 1 July 2009 or later relating to the sale and distribution of the Policies.
(e) Category 9 covers contracts and agreements between Westpac and any third parties in respect of the sale and distribution of the Policies.
(f) Category 10 covers correspondence with and records of meetings with several government, industry and regulatory bodies in respect of the manner in which the Policies were being sold to customers.
57 For those reasons, I consider that discovery of proposed categories 6 and 7 are not justified. I leave open the possibility that, once discovery has been given by Westpac in respect of the other categories, the applicant might renew its application for discovery of emails in a far more targeted way. The contents of particular discovered documents may point to the likely existence of other documents, including emails, which may be relevant to the issues in dispute. Any such targeted application would be considered on its own merits having regard to the likely relevance of the documents and the costs imposed by a more limited email search.
58 The remainder of these reasons address the other disputed categories.