Marundrury v Commonwealth Bank of Australia [2021] FCA 1379 | Case summary

Overview of the proceeding 19 The applicants' current pleading is their amended statement of claim filed 16 April 2021. The applicants have also provided to the Bank and to the Court a draft further amended statement of claim, which removes the third applicant as a party, and makes some adjustments to matters of detail (such as certain dates and bank account details). It is common ground that the third applicant should be removed as a party to the proceeding. Insofar as the draft further amended statement of claim makes changes to details, I will proceed on the basis of the proposed changes. 20 The applicants claim that the Bank is and was at all relevant times a provider of "designated services" to customers within the meaning of s 6 of the AML/CTF Act, and that it is and was at all material times a "reporting entity" within the meaning of s 5 of the Act. 21 The applicants claim that: Delania came to Perth in 2013 and established bank accounts with the Bank in Perth; Widya also opened bank accounts with the Bank in Perth; between April 2013 and October 2015, Delania's parents caused significant sums of money to be transferred from Indonesia to Delania's bank accounts; between April 2014 and October 2015, Fona also caused large sums to be transferred from Indonesia to bank accounts opened by Widya; the moneys were not transferred using normal banking channels; rather, Fona engaged a money changer in Indonesia, who charged significantly lower rates than the rates charged by banks; unknown to the applicants, no funds were transferred directly from Indonesia into Delania's and Widya's accounts; rather, funds equivalent to the amounts intended to be transferred were transferred by way of deposit into their accounts in multiple deposits of less than $10,000. 22 The applicants plead that, between July 2015 and March 2016, the Australian Federal Police conducted investigations into Delania's and Widya's accounts; proceedings were subsequently commenced by the Commissioner of the Australian Federal Police in the Supreme Court of Western Australia restraining the disposal of funds in Delania's and Widya's bank accounts pursuant to the Proceeds of Crime Act 2002 (Cth); ultimately, in 2020, a settlement was reached between the applicants and the Commissioner of the Australian Federal Police whereby the applicants agreed to forfeit a substantial sum of money comprising the balances in many of the bank accounts. 23 The applicants allege in paragraph 35 of the amended statement of claim that the Bank, as a provider of designated services to customers as defined in the AML/CTF Act, was under the duties set out in ss 36, 41, 43, 81, 82 and 123 of the Act. The applicants then allege that the Bank (referred to as CBA) was subject to the following contractual and other duties: 37 At common law, CBA owed a duty to its customers to advise them of doubtful or potentially illegal transactions occurring through its accounts. PARTICULARS This duty is implied by law in the contract between banker and customer. 38 The duty mentioned in paragraph 37 is inhibited and restricted by the provisions of the Act but, save to the extent that the performance of that duty is inhibited or restricted by the provisions of the Act, the duty remains. 39 At common law, CBA owed a duty to its customers to comply with all legislation relating to banking transactions. PARTICULARS This duty is implied by law in the contract between banker and customer. 40 That duty is reinforced by the provisions of the Banking Code of Practice 2013, by clause 4.1 of which CBA undertook to "comply with all laws relating to banking services." 41 Section 12ED of the Australian Securities and Investments Commission Act 2001 ("the ASIC Act") implies a warranty in every contract for the supply of financial services by a person to a consumer in the course of business that the services will be rendered with due care and skill. 41A At common law, CBA was under a public duty to take reasonable steps to prevent or stop its property being used in any illegal or criminal activities. 41B CBA's public duty extended to the applicants as members of the public. It appears from the above extract that, apart from the duties set out in the AML/CTF Act, the applicants allege that the Bank was subject to three distinct types of duty: a contractual duty; an implied warranty; and a public duty. 24 The applicants allege that the Bank breached the duties imposed by the AML/CTF Act and therefore breached its contractual and other duties. The relevant allegations in the amended statement of claim (omitting particulars and incorporating the proposed adjustments in the draft further amended statement of claim) are as follows: 44 Between 2 April 2013 and 22 July 2013 cash deposits, of a kind which if CBA had monitored the account as required by s. 36 of the Act would have aroused a suspicion within s. 41 of the Act, were paid into Delania's principal savings account. 44A Between 22 July 2013 and October 2015 further amounts were paid into Delania's primary account. 44B Many of the payments referred to in paragraph 44A were payments which fell within s. 36 of the Act and ought to have aroused in CBA a reasonable suspicion within s. 41 of the Act. 44C Between 10 February 2015 and 18 February 2015 cash deposits of a kind which, if CBA were monitoring the account as required by s. 36 of the Act, would have aroused a reasonable suspicion within s. 41 of the Act were paid into Widya's account no. 6000 11937076. 44D The amount of the payments set out in paragraphs 44 and 44C, their form and their distribution, were such as to give rise to a suspicion under s. 41A [sic] of the Act requiring the CBA to make a report to the AUSTRAC CEO within three business days or 24 hours of forming the relevant suspicion. 44E In breach of its obligations under the Act, the CBA: (a) did not have in place an anti-money laundering and counter terrorism program as required by s. 81; (b) alternatively, did not comply with the anti-money laundering and counter terrorism program which it did have in place as required by s. 82; (c) did not monitor the applicants' accounts as required by s. 36 of the Act; consequently: (d) failed to form a suspicion within s. 41 of the Act; and (e) failed to notify the AUSTRAC CEO of the suspicious transactions. 45 [Deleted] 46 [Deleted] 47 If CBA had complied with its obligations under the Act, it would have been under a duty to report to the AUSTRAC CEO: (a) in respect of the transactions mentioned in paragraph 44 hereof, by no later than 3 or 5 April 2013 depending on the categorization of the transaction; (b) in respect of the transactions mentioned in paragraph 44C hereof, by no later 11 or 13 February 2015 depending on the categorization of the transaction. 48 [Deleted] 49 The CBA, in breach of its obligations under the Act, did not report the transactions in paragraph 44 or the transactions in paragraph 44C to the AUSTRAC CEO at any time prior to the CBA receiving enquiries from the Australian Federal Police on 8 July 2015. … 53 By reason of the failure of CBA to comply with its obligations under s. 36, s. 41, s. 81 and s. 82 of the Act, the CBA: 53.1 has breached the warranty implied under s. 12ED of the ASIC Act; 53.2 has breached its common law duty to comply with all legislation relating to banking transactions; 53.3 has breached the undertaking in the Banking Code of Practice 2013 set out at paragraph 40 herein; 53.4 has breached its common law duty to advise: (a) Delania; (b) Widya; (c) Siga; of doubtful or potentially illegal transactions occurring through their accounts. (Emphasis added.) I note that paragraph 44D refers to s 41A of the AML/CTF Act. This appears to be an error as the Act does not and did not contain such a section. 25 The applicants allege that the Bank's breaches have caused them loss and damage. The relevant allegations (adjusted as proposed in the draft further amended statement of claim) are as follows: 51 If CBA had complied with the relevant provisions of the Act: 51.1 steps to forfeit the balance in Delania's primary account would have commenced no later than 2 September 2013; 51.2 a forfeiture order would have been made no later than 2 February 2014; and 51.3 steps to forfeit the balance in Widya's account No 1600 11937076 would have commenced no later than 28 February 2015; and 51.4 a forfeiture order would have been made no later than 28 July 2015. 52 Once a forfeiture order had been made in respect of the then existing accounts, the applicants would not have caused to be transferred further money from Indonesia to those accounts and would not have caused to be transferred any money to Australia other than by electronic bank transfer. … 53A By reason if its failure to take the reasonable steps referred to at Paragraphs 41A, 41B and 41C, the CBA allowed Delania, Widya and Siga's accounts to continue being used as instruments of crime, thereby caused the applicants and each of them loss and damage. 26 The applicants allege that the money that Fona caused to be transferred to Delania's account, other than money to be used to purchase a property, was to be held on trust for Fona (paragraph 25). It is alleged that Fona and Delania did not intend Delania to have unlimited control of the money, and they intended that Delania should account to Fona in respect of the money other than that used for her living expenses (paragraph 55). It is alleged that the money that Fona transferred to Widya's account was family money to which they were both entitled (paragraph 55A). It is alleged that the Bank owed Fona a duty of care "to deal lawfully and responsibly with the funds credited to Delania's and Widya's accounts" as a result of the arrangements initiated by Fona (paragraph 56). It is alleged that the Bank breached that duty (referring to paragraphs 44 to 53 of the pleading to provide the particulars of breach) and that the breaches have caused the applicants loss and damage (paragraphs 57, 58). 27 No defence has been filed at this stage.

Consideration 39 The Bank's key contentions on the present interlocutory application are two-fold: (a) First, the Bank contends that the applicants have no reasonable prospect of establishing a breach of s 41 of the AML/CTF Act as a result of the operation of s 124 of the AML/CTF Act, which has the effect that evidence pertaining to reporting obligations under s 41 is relevantly rendered inadmissible in this proceeding. (b) Secondly, the Bank contends that s 123 of the AML/CTF Act operates to prohibit the Bank from properly defending the allegation in respect of s 41, such that the case as put against it is manifestly unfair and constitutes an abuse of process. 40 I will outline the Bank's submissions on each of these contentions. 41 In relation to the first contention, the Bank submits that a central premise of the applicants' case in respect of the statutory duties is that, had the Bank complied with its monitoring and compliance obligations under ss 36, 81 and 82, it would have given the AUSTRAC CEO a suspicious matter report under s 41 (which it allegedly failed to do). The Bank submits that the balance of the applicants' allegations are founded on this premise, such that it is critical for the applicants to prove that the Bank breached s 41 in order to obtain relief. 42 The Bank submits that the applicants have no reasonable prospect of successfully prosecuting the proceeding due to the operation of s 124 of the AML/CTF Act; the applicants have not led any evidence on this application to show that they would be in a position to circumvent the application of that section and otherwise establish their claims. 43 The Bank submits that the applicants' case proceeds on the premise that: a suspicious matter reporting obligation ought to have arisen for the Bank in relation to one or more of the applicants under s 41(1) of the AML/CTF Act; notwithstanding this, the Bank failed to file a suspicious matter report in accordance with s 41(2) of the AML/CTF Act; and if the Bank had formed a suspicion and correspondingly complied with its obligation to file a report under s 41(2), the Australian Federal Police would have acted earlier to obtain a forfeiture order and thereby put the applicants on notice that they should not bring further funds into the country. 44 The Bank submits that the applicants bear the onus of proof in establishing their claims against the Bank; however, s 124 of the AML/CTF Act precludes the applicants from adducing evidence which is critical to their case. The Bank relies, in particular, on s 124(1)(b). The Bank notes that it provides that evidence is not admissible as to whether or not a report was prepared or provided to AUSTRAC and whether or not information (such as the formation of a suspicion) was contained in any such report; thus, irrespective of whether the Bank prepared and/or gave such a report, no evidence can be adduced to establish the position either way; this renders the applicants' claims unprovable. 45 In relation to the second contention set out in [39] above, the Bank submits that the Bank's alleged failure to form a suspicion and to provide a report to AUSTRAC under s 41 is put squarely in issue by the applicants and is the central plank of their case; however, s 123 of the AML/CTF Act prohibits the Bank from disclosing certain matters to any person other than "an AUSTRAC entrusted person" as defined in s 5 of the Act. 46 The Bank submits that, by operation of s 123, CBA is relevantly prohibited from disclosing to the applicants, the applicants' legal representatives or to the Court: (a) that the Bank has given, or is required to give, a report under s 41(2) (s 123(1)(a)); or (b) any information from which it could reasonably be inferred that the Bank has given, or is required to give, a report under s 41(2) (s 123(1)(b)). 47 The Bank notes that a breach of these provisions is a criminal offence under s 123(11). 48 The Bank submits that: the effect of this is that the Bank is prevented from denying the allegation that it failed to form a relevant suspicion and file a report as required by s 41; a denial of that allegation would amount to a disclosure prohibited by s 123(1); indeed, even a pleading to the effect that the Bank does not admit the allegation in reliance on the privilege against self-incrimination would potentially contravene s 123(1)(b) as it could constitute information from which the fact that a report was given could be inferred; the only response available to the Bank is to admit that it did not make a report (even if it did indeed make a report). The Bank submits that it is "cornered into either admitting the allegations or risking criminal prosecution if it attempts to defend itself properly (for example, if a denial were available)". 49 I accept the proposition that a central premise of the applicants' case is that the Bank breached its obligations under s 41 of the AML/CTF Act. However, I am not satisfied, at this stage, that the proceeding should be summarily dismissed by reason of s 123 or 124 of the AML/CTF Act. This is because, at this stage, there is the potential that the AUSTRAC CEO may be prepared to exercise the discretion in s 248 of the Act (set out at [18] above) and, if the discretion were exercised favourably, the issues raised by the Bank concerning ss 123 and 124 could be overcome. 50 In response to the proposition that the s 248 discretion may be available to overcome the issues that it raises, the Bank submits that s 248 confers on the AUSTRAC CEO a discretion over which neither the Bank nor the applicants would have any control. This may be accepted. However, in circumstances where there is the possibility of a favourable exercise of the discretion, it cannot be said, at this stage, that the applicants have no reasonable prospect of success because of s 124 or that the proceeding causes unfairness for the Bank by reason of s 123. An available approach would be to allow a period of time (say, four months) to enable the parties to explore whether the AUSTRAC CEO would be prepared to exercise the discretion. 51 By way of further response, the Bank submits that, unless and until an exemption has been given, there is a "real question" as to whether the Bank could confirm to the Court or the applicants that it has sought an exemption (or that such an exemption has been refused) without this itself giving rise to a reasonable inference that the Bank gave, or was required to give, a report to the AUSTRAC CEO under s 41(2) (as an exemption would not otherwise be required). I do not accept these submissions. I consider that it would be possible for the Bank to inform the Court and the applicants that it had applied to the AUSTRAC CEO to exercise the discretion in s 248 in relation to this proceeding. A statement expressed at this level of generality would not lead to an inference as referred to in s 123(1)(b) because, in any event, an application for the exercise of the discretion is required in relation to the admissibility of evidence as referred to in s 124(1)(b). Thus I do not accept that the Bank could not inform the Court and the applicants that it had applied to the AUSTRAC CEO to exercise the discretion. 52 The Bank's next submission in response to the potential operation of s 248 is as follows. The Bank submits that s 248 contemplates exemptions or declarations in respect of one or more specified persons from one or more specified provisions of the AML/CTF Act; on its face, this does not apply to s 124; in order to be effective, the AUSTRAC CEO would need to make a declaration that affects not only the Bank and each of the applicants but also the Court, in effect controlling the process by which this proceeding will continue. The Bank submits that it is "doubtful at best" that the AUSTRAC CEO is empowered to make such a declaration. These points, which are made in the Bank's outline of submissions at paragraphs 60-61, are reiterated in its written submissions in reply at paragraphs 12-14. There it is submitted that s 248 contemplates an exemption, from a specified provision, for a specified person or class of persons, which would ordinarily be the reporting entity; the provision is designed to exempt the reporting entity from complying with obligations it otherwise has under the Act. 53 I do not accept these submissions. The Bank's submissions focus heavily on s 248(1)(a), which provides that the AUSTRAC CEO may "exempt a specified person from one or more specified provisions of this Act". However, regard should also be had to s 248(1)(b), which provides that the AUSTRAC CEO may "declare that this Act applies in relation to a specified person as if one or more specified provisions of this Act were modified as specified in the declaration". While a power of this nature is unusual, there are precedents for it in other statutory schemes: see, for example, s 655A(1) of the Corporations Act 2001 (Cth). Under that provision, the Australian Securities and Investments Commission may "(a) exempt a person from a provision of this Chapter; or (b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration". While s 248(1)(b) refers to the AUSTRAC CEO making a "declaration", any such declaration has the character of a legislative or administrative decision and does not involve an exercise of judicial power. The scope of the power is expressed broadly. The AUSTRAC CEO has the power to declare that the Act applies "in relation to" a specified person as if "one or more" specified provisions were modified as specified in the declaration. It would therefore be open to the AUSTRAC CEO to declare that the Act applied in relation to the applicants and the Bank as if s 124(2) included an additional paragraph which referred to the present proceeding. I consider that a declaration to this effect would fall within the scope of s 248(1)(b). It would not be necessary to identify the Court as a specified person for the purposes of the declaration. It would be sufficient, to fall within the scope of s 248(1)(b), that the AUSTRAC CEO declared that the Act applied in relation to the applicants and the Bank as if s 124 were modified as specified in the declaration. 54 The Bank does not suggest that it would be beyond the scope of s 248 to exempt the Bank from s 123. It seems clear that it would be open to the AUSTRAC CEO under s 248(1)(a) to exempt the Bank from s 123 for the purposes of this proceeding. I note that conditions may be attached to an exemption: s 248(2). Thus, it would be open to the AUSTRAC CEO to impose a condition that the Bank is only permitted to disclose the relevant information to the applicants if the applicants have first given an appropriate confidentiality undertaking to the Bank. 55 For the above reasons, I am not satisfied, at this stage, that the proceeding should be summarily dismissed on the basis that the applicants have no reasonable prospect of success (due to s 124) or because it causes unfairness for the Bank (due to s 123). Subject to consideration of the Bank's other contentions, I consider that it would be appropriate to allow a period of time (say, four months) to enable the parties to explore whether the AUSTRAC CEO would be prepared to exercise the discretion. 56 I note for completeness that it does seem that a central element of the applicants' case is the proposition that the Bank breached s 41 of the AML/CTF Act. Thus, unless a declaration were made under s 248 in respect of s 124, it is difficult to see how the applicants could establish their case. To the extent that the applicants suggested that they could rely on admissions made by the Bank in a different proceeding, namely a civil penalty proceeding brought by the AUSTRAC CEO against the Bank under the AML/CTF Act (referred to in paragraph 8(a) of Ms Adams's first affidavit), I do not see how this course is available. Any admissions were presumably made only for the purposes of that proceeding. Further and in any event, it would need to be shown that any admissions applied to the applicants' bank accounts. Further, unless an exemption were granted under s 248 in respect of s 123, it is difficult to see how the proceeding would not cause unfairness for the Bank. Accordingly, on the basis of the material and submissions presently before the Court, it is difficult to see how this proceeding can continue absent a favourable exercise of the discretion in s 248. 57 I now turn to consider a number of other contentions raised by the Bank. 58 The Bank contends that Fona's claim is entirely without prospects and should be dismissed. The Bank notes that, in relation to Fona, there is no allegation that he was a customer of the Bank or had any contract with it. The Bank makes the following further submissions: (a) The amended statement of claim alleges that certain money transferred by Fona to Delania was intended to be held on trust for him (paragraph 25). The amount of money is not particularised, noting that an unspecified amount was dedicated to buying land, constructing a house and for living and study expenses incurred by Delania. More pressingly, however, the allegation does not clarify who held the money on trust. If the money was transferred by Fona to Delania, it would presumably be Delania who held any money on trust, rather than the Bank, which merely provided the account into which the money was transferred. No material facts are pleaded in respect of this trust, and the Court should not regard it as constituting a viable claim against the Bank insofar as the intention is to allege that the Bank held the money on trust. (b) The amended statement of claim also alleges that the Bank owed Fona a duty of care to deal lawfully and responsibly with the funds credited to Delania's and Widya's accounts (paragraph 56). The amended statement of claim is vague as to how this alleged duty was breached. The applicants merely state at paragraph 57 that the Bank "breached [this duty], particulars of which are set out at paragraphs [44] to [53] herein". This allegation does not disclose any meaningful duty, nor how the Bank was in breach. Importantly, the Bank did not deal with the funds at all once they were credited to Delania's and Widya's accounts, so it is unclear how the Bank could be said to have breached the duty (even if it did exist, which is denied). No evidence has been led on this application to establish even a prima facie case supporting this claim. (c) In correspondence, the applicants have taken the position that the Bank owed duties under the Banking Code of Practice to "potential customers", including Fona. They contend that the Bank represented to the public, and specifically to persons other than customers who dealt with accounts administered by the Bank (for example, by transferring money into or receiving money from those accounts) the way in which the Bank would administer those accounts. There is no connection between the alleged duty and the conduct said to have breached it. The applicants contend that the Bank owed duties to "potential customers", but do not provide any evidence to suggest that Fona was a "potential customer". Rather, they suggest that the duty the Bank in fact breached was based on a representation made to the public, including to persons who dealt with accounts administered by the Bank. If that is the case, then there is no evidence (nor any allegation) that Fona dealt with any such accounts. Rather, Fona provided money to a money changer in Indonesia, who (or indeed someone altogether different) "dealt with" Delania's and Widya's accounts by transferring money into those accounts. 59 I am not satisfied, on the basis of the above submissions, that Fona's claim against the Bank should be summarily dismissed. It may be that, if properly pleaded, Fona has a good cause of action against the Bank. However, I am satisfied that Fona's claims against the Bank are not properly pleaded in that they do not make clear the case that the Bank is required to meet. Insofar as Fona wishes to contend that certain moneys were to be held on trust for him (paragraph 25), the key elements of the trust (including the identity of the trustee and the amount of money subject to the trust) should be pleaded. The pleading should also make clear how the trust claim is relevant to Fona's claims made against the Bank. Insofar as Fona brings claims based on a duty of care (paragraphs 56 to 58), the material facts giving rise to the alleged duty, and the material facts constituting the alleged breach of that duty, should be pleaded. I do not consider it sufficient to refer, by way of particulars, to paragraphs 44 to 53. I consider that the material facts constituting the alleged breach of the duty of care need to be set out. Accordingly, I will strike out paragraphs 25 and 56 to 58 of the amended statement of claim, with a right to re-plead. 60 In the alternative to its application for summary dismissal, the Bank contends that the amended statement of claim should be struck out on the basis that no reasonable cause of action is disclosed. The Bank's submissions can be summarised as follows: (a) First, the statutory duties (being the allegation that the Bank had duties to comply with ss 36, 41, 43, 81, 82 and 123 of the AML/CTF Act) were not duties owed personally to the applicants. Indeed, the amended statement of claim does not plead the duties as being owed to the applicants, but merely states that the Bank had an obligation to comply with those provisions. Further, the breaches are alleged in vague terms. The amended statement of claim uses general formulations to allege breaches of the AML/CTF Act without clarifying with specificity how the Bank breached its obligations. For example, it is alleged that deposits made into Delania's and Widya's accounts were "of a kind" which would have aroused a suspicion under s 41, but no material facts are pleaded as to why the deposits bore this character. Likewise, it is pleaded that the "form" and "distribution" of the amounts were such as to give rise to a suspicion but, once again, no facts are pleaded as to why that was the case. In any event, putting those matters to one side, no cause of action is disclosed by alleging that the Bank had an obligation to comply with the AML/CTF Act, which it breached. That alleged breach is not something for which the applicants can get relief by way of damages under the AML/CTF Act, nor is such relief sought in the amended statement of claim. (b) Secondly, the applicants allege that the Bank owed a common law (or contractual) duty to its customers to advise them of "doubtful or potentially illegal transactions" occurring through its accounts, this duty being "inhibited and restricted" by the provisions of the AML/CTF Act. This claim suffers from a number of problems: (i) no material facts are pleaded as to what constitutes "doubtful and illegal transactions", nor any particulars provided of the transactions which attracted the duty in this case; (ii) the amended statement of claim does not identify the relevant provisions of the AML/CTF Act which "inhibit and restrict" the duty. Importantly, the amended statement of claim does not specify the extent to which the duty at common law can co-exist with the provisions of the AML/CTF Act, in particular s 123, which prohibits the Bank from disclosing matters which the applicants contend should have been conveyed to them; and (iii) while the particulars to amended statement of claim, paragraph 37, state that this duty is implied by law in the contract between "banker and customer", the amended statement of claim does not plead any material facts in respect of when the contract came into existence, the parties to it, its terms nor any other matters ordinarily pleaded for a breach of contract. (c) Thirdly, the applicants allege that the Bank owed a common law (or contractual) duty to its customers to comply with all legislation relating to banking transactions, reinforced by clause 4.1 of the Banking Code of Practice 2013 to "comply with all laws relating to banking services". To state that the Bank had a duty to comply with legislation is to state the obvious. However, the amended statement of claim does not clarify why that duty was owed to customers including the applicants, giving them a personal cause of action against the Bank. In correspondence, the applicants rely on case law which shows that the Banking Code of Practice can be incorporated into banking contracts by reference, but the applicants have not pleaded any contracts with particularity, nor any terms to the effect that the Banking Code of Practice was incorporated. (d) Fourthly, the applicants suggest that, by operation of s 12ED of the Australian Securities and Investments Commission Act 2001 (the ASIC Act), the Bank impliedly warranted that financial services provided to consumers would be rendered with due care and skill. This allegation goes nowhere. The amended statement of claim does not purport to claim damages under the ASIC Act. In any event, there is no entitlement under that Act to claim damages for a breach of s 12ED (see s 12GF, which concerns actions for damages). (e) Fifthly, the Applicants allege that, at common law, the Bank was under a "public duty" to take reasonable steps to prevent or stop its property being used in any illegal or criminal activities. In correspondence, the applicants have explained this duty as follows: "The [AML/CTF Act] places the Bank in a position akin to that of a statutory authority exercising, for the public good, powers and duties delegated to it by the state." In light of the position explained by the applicants in correspondence, a number of problems attend this allegation: (i) no material facts are pleaded to explain: why the Bank is in a position akin to that of a statutory authority in the manner suggested in correspondence; which powers have allegedly been delegated by the state; and which of those powers the Bank purportedly exercised or failed to exercise in respect of the applicants; (ii) no material facts are pleaded to explain why the applicants are entitled to claim damages for a breach of any such duty; (iii) the amended statement of claim alleges that the Bank had a duty to take reasonable steps to stop or prevent "its property" being used in illegal or criminal activities; no facts are pleaded as to which property of the Bank was used in illegal or criminal activities; and (iv) no material facts are alleged in respect of the illegal or criminal activities said to have taken place. (f) Sixthly, as a party to a contract for the supply of financial services to Delania and Widya, it is alleged that the Bank warranted that the services rendered by it would be rendered with due care and skill. On the face of the amended statement of claim: (i) no material facts can be discerned to explain the content of this warranty. For example, if the applicants intend to allege that the warranty to render services with due care and skill included a duty to comply with the provisions of the AML/CTF Act, then they have not pleaded that. If that is indeed their intention, then the allegation suffers from the same problems as the case based on the statutory duties; and (ii) it is not clear whether, and if so how, this warranty is alleged to have been breached. 61 While there is force in many of these submissions, I am not persuaded that no reasonable cause of action is disclosed by the pleading. In my view, the applicants' case based on breach of an implied contractual duty or an implied warranty is conceptually plausible and the pleading generally makes clear the case that the Bank has to meet. While the AML/CTF Act does not relevantly provide remedies for breach of its provisions, I nevertheless consider that it is open to the applicants to contend that it was an implied contractual term that the Bank would comply with the relevant provisions of the Act. Further, I consider it open to the applicants to rely on a warranty of due care and skill implied by s 12ED of the ASIC Act into contracts for the supply of financial services, and to contend that the Bank breached that warranty in circumstances where (it is contended) the Bank breached the relevant provisions of the AML/CTF Act. While the ASIC Act does not itself create a cause of action for damages or for breach of the implied warranty, it does not exclude a claim for contractual damages. 62 However, I consider that the following paragraphs of the amended statement of claim are not properly pleaded and should be struck out (with a right to re-plead) or need to be supplemented by further and better particulars. (a) Insofar as the applicants allege in paragraph 37 that the Bank owed an implied contractual duty to the applicants to advise them of doubtful or potentially illegal transactions, I consider it necessary for the applicants to provide the usual particulars of the contract (or contracts) upon which they rely. (b) Insofar as the applicants allege in paragraph 38 that the alleged implied contractual duty is "inhibited and restricted by the provisions of the Act", I consider it necessary for the applicants to provide particulars of the provisions of the AML/CTF Act to which they refer. (c) Insofar as the applicants allege in paragraph 39 that the Bank owed an implied contractual duty to the applicants to comply with all legislation relating to banking transactions, I consider it necessary for the applicants to provide the usual particulars of the contract (or contracts) upon which they rely. (d) Insofar as the applicants allege in paragraph 40 that the alleged implied contractual duty is "reinforced" by the provisions of the Banking Code of Practice 2013, the paragraph is unclear and does not enable the Bank to know the case it is required to meet. It is necessary for the applicants to make clear how they rely on the Banking Code of Practice. Is it alleged that its terms were incorporated into the contract or contracts? If so, how is that alleged to have occurred? I will therefore strike out paragraph 40. In consequence, I will also strike out paragraph 53.3, which contains an allegation that the Bank breached the undertaking in the Banking Code of Practice set out in paragraph 40. (e) Insofar as the applicants allege in paragraph 41 that a warranty of due care and skill was implied by s 12ED of the ASIC Act, I consider that further and better particulars are required as to what "due care and skill" required on the facts of this case. If the applicants contend that this required the Bank to comply with certain provisions of the AML/CTF Act, this should be made clear. (f) In paragraphs 41A to 41E, the applicants allege that the Bank was under a "public duty" to take reasonable steps to prevent or stop its property being used in any illegal or criminal activities and that it breached this duty. Based on the correspondence referred to in the Bank's submissions, it seems that the applicants allege that the Bank is in a position akin to a statutory authority. In my view, these paragraphs are deficient as they do not make the applicants' case clear. No material facts are pleaded to support the existence of the alleged public duty. In particular, no material facts are pleaded to explain why the Bank is in a position akin to that of a statutory authority. Further, the pleading does not make clear which property of the Bank was allegedly being used for illegal or criminal activities. Further, no material facts are alleged in respect of the illegal or criminal activities said to have taken place. I will therefore strike out paragraphs 41A to 41E. As a consequence, I will strike out paragraph 53A, which is dependent on those paragraphs. 63 I note that a number of the paragraphs of the amended statement of claim (eg, paragraphs 42.3, 43.3 and 53.4) refer to the third applicant, Siga, who the applicants agree should be removed as a party. These paragraphs need to be amended to remove the references to Siga. I do not propose to strike out these paragraphs, but merely note in these reasons that they need to be amended.

Marundrury v Commonwealth Bank of Australia

At a glance

Court

Decision date

Before

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (6)

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