Reilly v Australia and New Zealand Banking Group Limited

Introduction 1 The applicants commenced this proceeding on 28 February 2020 on their own behalf and on behalf of all persons who: (a) at any time between 1 January 2010 and 30 June 2019 were issued at least one credit insurance policy with respect to a credit card issued or a personal loan advanced by the first respondent; and (b) have suffered loss or damage by reason of the contravening conduct of the respondents, and/or at whose expense the respondents were unjustly enriched, as pleaded in the statement of claim. 2 The respondents to the proceeding are: (a) Australia and New Zealand Banking Group Limited (ANZ), the first respondent; (b) OnePath Life Limited (OnePath Life), previously known as ING Life Limited, the second respondent; (c) OnePath General Insurance Pty Limited (OnePath General), previously known as ING General Insurance Pty Ltd, the third respondent; and (d) QBE Insurance (Australia) Limited, a wholly owned subsidiary of QBE Insurance Group Limited, the fourth respondent. 3 Until 31 May 2019, OnePath Life and OnePath General were subsidiaries of ANZ. They have since been sold by ANZ. Reflecting their separate ownership, there is separate representation for ANZ, the OnePath respondents and the QBE respondent. 4 The allegations in the statement of claim are that (stated in general terms): (a) each of the respondents contravened s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by engaging in misleading and deceptive conduct in issuing or arranging the issue of the credit insurance policies; (b) ANZ is liable to compensate the applicants and group members under s 961M of the Corporations Act 2001 (Cth) (Corporations Act) in so far as representatives of ANZ contravened: (i) s 961B of the Corporations Act by failing to act in the best interests of the applicants and group members when providing advice to them about the credit insurance policies; (ii) s 961G of the Corporations Act by providing advice about the credit insurance policies in circumstances where it would not be reasonable to conclude that the advice was appropriate to the applicants and group members had the adviser satisfied the duty under s 961B to act in the best interests of the applicants and group member; (c) each of the respondents contravened s 12CB of the ASIC Act by engaging in conduct, in trade or commerce and in connection with the supply, or possible supply, of financial services, which was, in all the circumstances, unconscionable in arranging the issue of the credit insurance policies; (d) the second, third and fourth respondents contravened s 12CB of the ASIC Act by engaging in conduct, in trade or commerce and in connection with the supply, or possible supply, of financial services, which was, in all the circumstances, unconscionable in issuing or giving effect to the provisions of the credit insurance policies including by charging premiums,; (e) the applicants and at least some group members acquired the credit insurance policies and paid the premiums under them under one or more of the following causative mistaken beliefs: (i) that they were required to take out the relevant policy in order to obtain the credit card or personal loan, as the case may be; further or alternatively (ii) that the relevant policy had material value to them, and the respondents are liable to make restitution of the premiums paid to them. 5 The statement of claim refers to the findings made by ASIC in its Report 622 published in July 2019 titled "Consumer credit insurance: Poor value products and harmful sales practices". It is alleged that the credit insurance policies issued by the respondents that are the subject of the proceedings are also the subject of ASIC's Report. 6 The proceeding was scheduled for an initial case management conference today. Following the COVID-19 outbreak in Australia, the Federal Court introduced special measures to minimise in person attendance on Court premises, with the Court's priority being the health and safety of the community, and in particular, parties, practitioners, judges and staff, and the families of all of these groups: see Special Measures in Response to COVID-19 (SMIN-1). 7 Adopting those measures, I determined that initial timetabling orders in the proceeding should be made "on the papers". I asked the parties to confer and seek to agree orders and provide them to the Court and, failing agreement, to provide the Court with each party's proposed orders and supporting submissions. The parties were unable to agree orders and, on 1 April 2020, filed: (a) an affidavit of Andrew Paull affirmed 1 April 2020 filed on behalf of the applicants; (b) a proposed form of orders and submissions dated 1 April 2020 filed on behalf of the applicants; (c) submissions dated 1 April 2020 filed on behalf of the first respondent; (d) a proposed form of orders and submissions dated 2 April 2020 filed on behalf of the second and third respondents; and (e) a proposed form of orders and submissions dated 2 April 2020 filed on behalf of the fourth respondent. 8 These reasons briefly explain the orders I have made today. Although the orders are only procedural, in the present circumstances where the work of the Court is impacted by the COVID-19 outbreak, and having regard to the likely public interest in this proceeding, I consider it beneficial to the parties and the public to provide a public record of my reasoning in making the orders. 9 I also note that the Court is conscious of the impact that the COVID-19 outbreak is having on legal practitioners and companies, with many employees isolating themselves in accordance with Government guidelines. Inevitably, the present circumstances will make it more difficult for litigants to progress Court proceedings and allowance needs to be made in timetabling orders for those difficulties. It is unnecessary for the parties to adduce evidence of such difficulties as the Court can take judicial notice of the current environment. However, if any party is unable to comply with the more generous timetable that has been allowed, the Court may still require the party to provide evidence as to the reasons for the non-compliance.

Pleadings 10 The parties have not agreed on a timetable for the completion of pleadings. The respondents seek until 12 June 2020 for the filing of their defences. Each of the respondents say that the allegations made in the proceeding span a period of 9 ½ years and, in the current environment, there are practical difficulties in accessing relevant staff and resources. 11 I accept that there are likely to be unusual difficulties for the respondents at the present time. I will make an order for defences to be filed on 5 June 2020. That is a period of just over 3 months since the filing of the proceeding. It also enables other timetabling steps to be undertaken in a period that will enable the proceeding to return for case management on 7 August 2020 together with proceeding VID 134 of 2020, referred to below.

Discovery 12 The applicants seek orders for an initial tranche of discovery in respect of various categories of documents, as well as orders for the respondents to provide certain categories of information under affidavit. In short, the applicants contend that the documents it seeks are clearly relevant and the provision of the documents and information they seek by the respondents will progress the proceeding efficiently. 13 The respondents generally oppose the orders sought by the applicants. They contend that the applicants have not demonstrated that the documents and information they seek are necessary and, until pleadings are closed, it is not possible to determine the extent of the factual and legal dispute between the parties. They also point to the practical difficulties arising from the COVID-19 outbreak. Despite that, the first and fourth respondents have indicated that they do not oppose an order for discovery of the "customer file" of the applicants. 14 The applicants also propose orders timetabling a process of conferral about discovery after pleadings have closed, and each of the respondents has indicated that such conferral is appropriate. 15 I consider that there is force in the respondents' submissions. The proceeding is at an early stage and defences are yet to be filed. Further, and in my view significantly, the "genuine steps statement" filed by the applicants in accordance with s 6 of the Civil Disputes Resolution Act 2011 (Cth) (CDR Act) states that no steps have been taken to try to resolve the issues in dispute between the applicants and the respondents in the proceeding. The statement goes on to explain that the reason no steps have been taken is that: (i) the proceeding is an "open class" representative proceeding; (ii) it is not possible for the applicants to represent the interests of group members other than by the commencement of a representative proceeding; (iii) having regard to the dates that relevant credit insurance policies were issued, the applicants' lawyers considered that all available resources should be directed to the commencement of the proceeding; and (iv) the applicants' lawyers considered that trying to resolve the proceedings was highly likely to be a waste of costs. 16 Under s 11 of the CDR Act, I may take account of whether a litigant has taken genuine steps to resolve the dispute in making orders for the conduct of the proceedings. Without expressing any view as to the reasons given for not having taken steps to try to resolve the dispute, particularly reason (iv) referred to above, it is clear that the applicants have not to date engaged in any discussions with the respondents in relation to the claims made in the proceeding. Until the respondents file defences, it is not known what response the respondents will make to the claims and the extent of any admissions that may be made. 17 In those circumstances, I consider that orders for discovery and disclosure of information by the respondents at this time should be limited so as to avoid wasted costs. I expect that, once the respondents have filed their defences and the applicants have filed a reply, the parties will be in a position to engage in some discussions about the proceeding and its possible resolution, which will be the first such discussions. The parties will be able to make an initial assessment of their respective positions and, if there is no immediate prospect of resolution, discuss the scope of necessary discovery. 18 As already noted, I am also conscious of the difficulties likely to be faced by the respondents in searching for documents at the present time when significant numbers of employees are likely to be working remotely. That consideration affects both the scope of discovery to be ordered at present and the time within which discovery is to be given. 19 Having regard to the above considerations, I will make orders for the respondents to give discovery of the following documents sought by the applicants: (a) in the case of each respondent, the "customer file" of the applicants in relation to the policies acquired by the applicants, being all recorded communications with the respondents and all relevant policy documentation; and (b) in the case of the first respondent, the independent review undertaken by the first respondent as referred to in ASIC Report 622 at page 6. 20 I will also order the respondents to file and serve an affidavit setting out the following information sought by the applicants: (a) where and how records of the consumer credit insurance premiums received and claims paid since 1 January 2010 are held; and (b) the names of any committees (including sub committees), working groups or teams which managed or governed the credit insurance policies in the period since 1 January 2009 as well as the members of the same. 21 The above information is limited and I accept the applicants' submission that disclosure of that information is likely to assist the parties in conferring about discovery. Conversely, I will not at this time require the respondents to identify the names of employees who have been responsible for, overseen and/or managed the relevant credit insurance products between 2008 and present and where and how those persons' records and emails are stored. I accept the respondents' submission that that is likely to be a time consuming exercise which may prove to be unnecessary. 22 I will also make orders for the parties to confer in relation to discovery, but for such conferral to occur after pleadings have closed and the above discovery and information has been provided by the respondents.

Notice about commencement and opt out 23 The applicants also sought orders for the parties to confer about the form of orders and notice regarding the commencement of the proceeding and the rights of group members to opt out of the proceeding. The respondents oppose such orders on the basis that they are premature. 24 I consider that the timetable proposed by the applicants for such conferral is too early, having regard to both the timetable for pleadings and the present environment. However, it is desirable that such conferral occur prior to the next case management hearing and I will make orders to that end.

Proceeding VID 134 of 2020 25 The applicants seek orders for the case management of this proceeding together with proceeding VID 134 of 2020 issued against Westpac Banking Corporation and related entities, in which allegations are made of similar conduct in relation to Westpac consumer credit insurance products. The applicants' lawyers in this proceeding, Slater and Gordon, are also lawyers for the applicant in proceeding VID 134 of 2020. The applicants submit that, given the similarities in the claims, issues and parties (i.e. representative proceedings against banks and insurers in respect of the similar types of products and conduct), it would allow for the most efficient use of judicial and administrative resources for the proceedings to be case managed together. 26 Proceeding VID 134 of 2020 is the subject of separate case management orders that I have made today: see Kemp v Westpac Banking Corporation [2020] FCA 437. The claims made in that proceeding are materially the same as those made in this proceeding, but of course the Westpac proceeding concerns credit insurance policies issued or arranged by Westpac and the other respondents to that proceeding. 27 In my view, it is neither necessary nor appropriate to make the order sought by the applicants at this time. It can be accepted that the claims made in each of the proceedings are materially the same. Given that similarity, for the present the Court will endeavour to case manage the proceedings together. For that reason, I have aligned the timetable in this proceeding with the timetable in the Westpac proceeding so that the next case management hearings will be on the same date. However, the proceedings are not otherwise connected. The parties are entirely separate. Depending on the responses made to the claims by the respective respondents, the proceedings may give rise to different issues that have to be determined, both interlocutory and at trial. In due course, it may emerge that the efficient management of each proceeding requires the proceedings to be case managed separately. That can be kept under review and there is no need for formal orders to be made.

Conclusion 28 In conclusion, I reiterate that the orders made today endeavour to make allowance for the present circumstances confronting legal practitioners and litigants as a result of the COVID-19 outbreak. If any party encounters difficulties in complying with the timetable set by the orders, I would expect that they will discuss the difficulties with the other party and approach the Court as required. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan.