Lynch v Cash Converters Personal Finance Pty Ltd

Relevance 18 The applicant contended that the documents are relevant to the applicant's unconscionability case as they concern the method by which Cash Converters assessed and approved loans. 19 Cash Converters submitted that the ASIC category captures irrelevant documents because it seeks correspondence with ASIC in a period ending some three and a half years after the relevant period and in the context of an investigation which culminated in the provision of an EU. In particular, Ms Collins SC, senior counsel for Cash Converters, contended that the use of benchmarks is not an issue in the proceeding. 20 Ms Francois, counsel for the applicant, responded to this contention by observing that benchmarking is a form of automation, being an assumed amount used to account for a consumer's expenses calculated as a percentage of a consumer's gross income. This definition of "benchmark" is taken from the EU. 21 I accept that benchmarking may form part of an automated process of the kind alleged to have been undertaken by Cash Converters. Accordingly, I will consider the application for discovery on the basis that the use of benchmarks may be an issue in the proceeding. 22 In my view, the ASIC category is targeted to a significant issue in the proceeding, namely, "the extent to which procedures for the approval of Loans in the Interest Rate Cap Period were automated". Understanding the word "automated" to refer to the automatic control of a process, the words "or used benchmarks" refer to a technique by which the process might be automated. Therefore, I accept that the ASIC category seeks, and only seeks, documents that are relevant to an issue in the proceeding. 23 The ASIC category is also targeted to communications between Cash Converters (or entities related to it) and ASIC. Communications of this type are likely to record Cash Converters' considered views on the matters which they address. It may well be significant to know about statements to ASIC concerning the extent to which the relevant procedures were automated.

Scope of discovery already given 24 Cash Converters submitted that discovery of the ASIC category will not facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. 25 Mr Betts' evidence was that Cash Converters have already incurred costs in excess of $1 million for discovery. A third party contractor was engaged to assist with the identification and collection of material for the purpose of providing discovery and the discovery process involved the collation of over 1 million documents. Some 307,665 documents were processed and 11 tranches of documents have been discovered. Further costs will be incurred in the discovery process pursuant to the Court's most recent orders. 26 Cash Converters submitted that documents regarding the loan assessment process, including procedure documents, have already been discovered. It submitted that, to the extent that the applicants' concern is that there is a gap in the documents already discovered or to be discovered (which Cash Converters does not accept), that concern would be aptly met with an order for discovery of the "alternative category", considered below. 27 I accept that it is relevant to consider the breadth of the discovery that Cash Converters has already given. On one view, discovery pursuant to the December 2015 orders should have produced relevant communications with ASIC at least for the period prior to 30 June 2013. However, the evidence does not confirm that this is the case.

Oppression 28 By letter dated 21 March 2017, the solicitors for Cash Converters informed the applicant's solicitors that at least seven of Cash Converters' officers communicated with ASIC during the course of ASIC's investigation. The ASIC category refers to these officers and three others, whom the applicant's lawyers consider to be likely to have communicated with ASIC. 29 Cash Converters contended that, if discovery of the ASIC category is ordered, they will need to undertake substantial additional searches beyond those required under the 2 March 2017 discovery orders to collect the documents relating to the relevant personnel and will need to run searches over and review both the existing and further collection of material for relevance. In particular, they will be required to collect documents relating to the period from the end of the "Discovery Period" to 20 November 2016. 30 Mr Betts estimated that this will result in significant costs, possibly more than $150,000. 31 It was submitted by Cash Converters that the ASIC category may include "without prejudice" communications relating to the negotiation of the EU. However, if the negotiations for the EU do not include the subject matter of the extent to which procedures for the approval of loans in the interest rate cap period were automated or used benchmarks, then they would not fall within the scope of the ASIC category. Ms Collins SC did not point to anything in the EU which suggests that the ASIC category is likely to capture "without prejudice" communications relating to the EU, although it is conceivable. In particular, negotiations about the period of the conduct covered by the EU may have addressed this subject matter. However, I am not satisfied that this possibility would render discovery by reference to the ASIC category oppressive without more. 32 In my view, the more time-consuming and expensive part of the proposed discovery is likely to be the consideration of whether a relevant communication falls within the subject matter of the ASIC category, that is whether the communication is "regarding the extent to which procedures for the approval of Loans in the Interest Rate Cap Period were automated or used benchmarks". As Ms Collins SC noted, the scope of ASIC's investigation extended beyond that issue to cover, more generally, questions of whether Cash Converters had contravened the responsible lending provisions of the National Credit Act.

Proposed alternative category 33 The respondents have proposed an alternative category of discovery as follows: All documents of Key Personnel in the Interest Rate Cap Period regarding or referring to the extent to which procedures for the approval of Loans were automated, including but not limited to the use and/or functions of the Safrock System and/or the Mon-e System in respect of the assessment and/or approval of Loans in the Interest Rate Cap Period. 34 Cash Converters submitted that this alternative category will capture documents relevant to the particular issue in dispute (to the extent that they have not already been discovered pursuant to orders made in 2015) but in a way which does not involve substantial additional searches and consequential expense. 35 Accepting that submission, the alternative category does not address the matter of legitimate concern to the applicant, namely, communications with ASIC about Cash Converters' procedures.

Consideration 36 I am satisfied that discovery of the ASIC category will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. Documents falling within the category are likely to be relatively few in number, and to contain considered communications with a Commonwealth regulator about Cash Converters processes. It is not clear that all documents falling within the category have already been discovered, even to the extent that they were created prior to 30 June 2013. Although I acknowledge that the additional discovery may be expensive, in my view, the issue to which they relate is a significant one and it will facilitate the just resolution of the proceeding to grant the discovery sought. The scope of the category is appropriately restricted by subject matter. The time frame for the relevant communications is appropriate having regard to the apparent duration of ASIC's investigation. Having regard to these matters, I am persuaded that the discovery sought by the applicant will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. 37 Accordingly, I will make the orders sought. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.