Steffen v ANZ Banking Group

Federal Court of Australia Act 1976 LEGISLATION CITED : Federal Court Rules Uniform Civil Procedure Rules 2005

Airways Corp of New Zealand v Koenig [2002] NSWSC 521 Bio Transplant Inc v Bell Porter Securities Ltd [2008] NSWSC 694 Cappuccio v Australia and New Zealand Banking Group Limited [1999] FCA 1188 C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 CASES CITED : Harman v Secretary of State for the Home Department [1983] 1AC 280 Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1281 Newcrest Mining Limited v Apache Northwest Pty Ltd (No2) [2008] FCA 1663 Panasonic Australia Pty Ltd v Ngage Pty Ltd (No2) [2006] NSWSC 399 SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 Totalise plc v Motley Fool Ltd [2003] 2 All ER 872

PARTIES : Joachim Kurt Steffen (Plaintiff) Australia and New Zealand Banking Group Limited (Defendant)

COUNSEL : D R Pritchard SC / J S Emmett (Plaintiff) J T G Gibson (Defendant)

SOLICITORS : Colin Biggers & Paisley (Plaintiff) Henry Davis York (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50245/08 JOACHIM KURT STEFFEN v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (No.2) JUDGMENT 1 HIS HONOUR: On 15 July 2009 I gave judgment on an application by the plaintiffs for preliminary discovery pursuant to UCPR rr 5.2, 5.3. I concluded that the plaintiffs were entitled to preliminary discovery from ANZ, to the extent or with the limitations that I set out in my reasons, and directed the parties to bring in short minutes of order to give effect to my reasons. 2 The parties were able to agree on most of the orders to be made. They remained in disagreement on two matters:

(1) whether preliminary discovery should be provided only on the basis of express confidentiality undertakings given by the plaintiffs; and

(2) as to one aspect of costs. 3 I made orders on 12 August 2009, for reasons very sketchily indicated, and said that I would give more detailed reasons. These are my detailed reasons for making those orders. Confidentiality undertakings 4 The orders that I made were, relevantly, in the following terms: 1. Subject to Order 5 below, the defendant, by no later than 23 September 2009, give discovery under Part 5 Rule 5 of the Uniform Civil Procedure Rules , 2005 of the documents identified in Schedule 1 to these orders. 2. Division 1 of Part 21 of the Uniform Civil Procedure Rules, 2005, applies to and in respect of discovery and inspection of documents the subject of order 1 in the same way as it applies to the discovery and inspection of documents the subject of an order for discovery under that division, save that the reference in Part 21 to the proceedings shall be taken to be a reference to the proceedings referred to in order 3. 3. Unless and to the extent that the Court otherwise orders, or the parties otherwise agree, the plaintiffs and/or the "Investors" (as defined in paragraph 1 of the Judgment dated 15 July 2009), or any of them, be at liberty to use the documents disclosed by the defendant, in compliance with order 1 hereof only for the purpose of any proceedings to be commenced by the plaintiffs and/or the Investors or any of them in the Supreme Court of New South Wales and/or any other court of competent jurisdiction. 5 When discovery is to be given under rr 5.1, 5.2 or 5.3, r 5.5 applies. That rules read as follows:

Division 1 of Part 21 applies to and in respect of the discovery and inspection of documents the subject of an order for discovery under this Part in the same way as it applies to the discovery and inspection of documents the subject of an order for discovery under that Division. 6 Division 1 of Part 21 deals with discovery and inspection generally. It provides for orders for discovery (r 21.2), the form of a list of documents and affidavit and certificate in support (rr 21.3, 21.4) and other matters. Of particular importance for present purposes, r 21.7 (which falls within Division 1 of Part 21) reads as follows: 21.7 Discovered documents not to be disclosed

(1) No copy of a document, or information from a document, obtained by party A as a result of discovery by party B is to be disclosed or used otherwise than for the purposes of the conduct of the proceedings, except by leave of the court, unless the document has been received into evidence in open court. (2) Nothing in subrule (1) affects the power of the court to make an order restricting the disclosure or use of any document, whether or not received into evidence, or the operation of any such order. 7 In substance, r 21.7 embodies in statutory form what is often called the "Harman" implied obligation of confidentiality (see Harman v Secretary of State for the Home Department [1983] 1AC 280). 8 The undertakings sought by ANZ went well beyond the terms of r 21.7. 9 I set out at [100] of my earlier reasons the categories of documents in respect of which discovery was sought. The discovery that I said that I would order (and have now ordered) is somewhat narrower, but not in any way relevant for present purposes. There is nothing on the face of the documents described in those categories to suggest that they are of particular or unusual, let alone commercial or other sensitivity. Nor was there any evidence to that effect. I accept, of course, that the documents in question would ordinarily be regarded as documents that should be kept confidential. 10 In my view, r 21.7 (modified so that "the proceedings" to which it refers are any proceedings commenced by the plaintiffs or the investors once discovery is given) provides adequate protection for any legitimate expectation of confidence. No submission was made that the documents were of such a character that some higher protection ought to be given to them; and no such submission could have been accepted, in the absence of any evidence to support it. 11 Accordingly, I made order 3 in the form set out above, and declined to exact, as a condition of making the orders, the undertakings sought by ANZ. Costs 12 The parties agreed that the plaintiffs should:

(1) pay ANZ's costs of compliance with the orders for discovery; and

(2) give security, in a sum agreed between them, for those costs. 13 They disagreed as to the costs order that should be made in respect of the application for preliminary discovery. The plaintiffs sought an order that ANZ pay their costs. The orders sought by ANZ were somewhat more complicated. As set out in paragraph 5 of the written submissions provided by ANZ on the application for costs, they were as follows: 5. The Defendant submits that the Court should make one of the following orders: (a) In the event that the Plaintiffs commence any substantive proceedings in any court within 12 weeks of the receipt of the documents produced pursuant to the preliminary discovery, the costs of the Plaintiff's application in this proceeding follow the event of that proceeding, failing which the Plaintiffs are to pay the Defendant's costs as agreed or assessed. (b) In the event that the Plaintiffs commence any substantive proceeding in any court within 12 weeks of the receipt of the documents produced pursuant to the preliminary discovery, the costs of the Plaintiffs' application in this proceeding follow the event of that proceeding, otherwise no order as to costs. The competing submissions 14 Mr Pritchard of Senior Counsel, who appeared with Mr Emmett of counsel for the plaintiffs, submitted that:

(1) the general presumption was that costs should follow the event unless the Court otherwise orders (UCPR r 42.1);

(2) in this case, there was an "event": the plaintiffs had obtained substantially the whole of the relief sought by them; and

(3) ANZ had chosen to conduct the proceedings as adversary litigation, and should bear the consequences (dictated by r 42.1) of that choice. 15 Mr Gibson of counsel, for ANZ, submitted that:

(1) the orders sought by ANZ were consistent with costs orders made by the Federal Court of Australia in respect of applications under Order 15A r 6 of the Federal Court Rules;

(2) as I had said in my earlier reasons at [18] "it is safe to be guided by statements of principle, as to the nature of the principles and the relevant discretionary considerations, in decisions given by the Federal Court of Australia on r 6";

(3) particularly bearing in mind the "extraordinary" nature of the jurisdiction to order preliminary discovery, ANZ had acted appropriately in seeking to maintain the confidentiality of the documents in question, many of which were documents of its customers or of its correspondent banks in other countries;

(4) the plaintiffs did not obtain all the documents that they had sought, and in any event their success was based, ultimately, only on evidence (and a further amended summons) served very late in the day and concessions made then or even later; and

(5) his client had made a "without prejudice" attempt to resolve the dispute, and the plaintiffs had made no attempt to negotiate thereafter. 16 In reply, Mr Pritchard submitted that:

(1) the Federal Court Rules contained no equivalent of r 42.1;

(2) ANZ's defence of the proceedings had gone far beyond what might have been expected of a bank asserting the confidentiality of its customers' and correspondent banks' documents;

(3) the substantial success obtained by his clients was based, in the main, on material available to ANZ well before the hearing, and the fresh material and other matters thereafter on which Mr Gibson relied were in response to criticisms made by ANZ in its written submissions; and

(4) so far from helping ANZ, the terms of the "without prejudice" offer showed that ANZ was quite prepared to give away its customers' and correspondent banks' confidentiality, and that its real concern was not to reveal its own documents. Decisions on which the parties relied 17 Mr Pritchard relied on the decision of Simpson J in Airways Corp of New Zealand v Koenig [2002] NSWSC 521. In that case, her Honour had concluded, in her primary reasons, that the plaintiff should have in substance the preliminary discovery sought by it. The parties thereafter disagreed as to costs. Her Honour referred at [6] and following to the decision of the Court of Appeal of England and Wales in Totalise plc v Motley Fool Ltd [2003] 2 All ER 872. That was a case where the plaintiff sought "identity" preliminary discovery. Aldous LJ, who gave the judgment of the Court, said at 878 [22] that "such applications are not truly ordinary adversarial proceedings as the defendant… does not normally resist the order being made. Such defendants have become mixed up in tortious acts and are only concerned that duties and rights, such as duties of confidence and legitimate interests of privacy, are considered by the Court". Thus, his Lordship said at 880 [30]: [30] The court when considering its order as to costs … should consider all the circumstances. In a normal case the applicant should be ordered to pay the costs of the party making the disclosure including the costs of making the disclosure. There may be cases where the circumstances require a different order, but we do not believe they include cases where: (a) the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it; (b) the party was under an appropriate legal obligation not to reveal the information, or where the legal position was not clear, or the party had a reasonable doubt as to the obligations; or (c) the party could be subject to proceedings if disclosure was voluntary; or (d) the party would or might suffer damage by voluntarily giving the disclosure; or (e) the disclosure would or might infringe a legitimate interest of another. 18 Simpson J, having referred to what Aldous LJ had said, stated at [9] that a "defendant to an application for preliminary discovery is, in one sense, in a difficult position. That party ordinarily has no involvement in what is intended or anticipated to be the substantive proceedings, and is, often enough, caught up in a skirmish between two other parties". However, her Honour said, "that does not… reflect the reality in the present case". That was because, as her Honour explained at [10], the individual whose identity was sought had been at the relevant time an employee of the defendants, and the defendants' computer system had been used for the transmission of the allegedly defamatory emails. No doubt, the defendants apprehended that they might have some liability for the acts of that employee. 19 In any event, her Honour said at [10]: "The defendants had persistently refused to cooperate. They defended the application on two bases that were not in the result sustained. It would have been a simple matter for them to have provided the plaintiff with the information the plaintiffs sought, and which the defendants ultimately yielded. In my opinion, the defendants must live with the consequences of their decision to defend the proceedings." 20 At [11], her Honour distinguished the decision in Totalise on the basis that, whereas the Court in that case had observed that the proceedings were not "ordinary adversarial proceedings", in this case, "the litigation as it proceeded was adversarial in nature, or at least akin to adversarial litigation. The plaintiffs were… entitled to the information they sought; while the defendants were equally entitled to resist the production of that information, the consequences of their making a judgment which turned out to be wrong are the same as such consequences for any other unsuccessful litigant". 21 In Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1281, Adams J referred at [8] to the decision of Simpson J in Airways Corporation and to what were said to be decisions of the Federal Court indicating a different approach to costs (I will turn to these in a moment). His Honour said that the general position appearing from the Federal Court decisions "has much to commend it". However, he said, the advantage of the approach taken by Simpson J "is both simplicity and consistency with the general principles attaching to costs orders". His Honour said that her Honour's view "is plainly correct" and that in any event it should be adopted "for reasons of comity". 22 Mr Pritchard referred to the decision of Young CJ in Eq in Panasonic Australia Pty Ltd v Ngage Pty Ltd (No2) [2006] NSWSC 399. His Honour said in that case at [41] that "as a general rule… if there is a contested application then costs follow the event. However, where a party seeks a special order from a judge and the other side does not appear to contest, there is a lot to be said for making the plaintiff bear its own costs". 23 Mr Pritchard referred also to the decision of Gyles J in C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864. That was a case under Order 15A r 6. His Honour said at [50]: "There is much to be said for the view that a respondent in these circumstances is entitled to put the applicant to proof except in a clear case. Some judges have been disposed to make orders which, to a greater or lesser extent, leave costs to be determined after the result of preliminary discovery and inspection is known, and even to depend up, to some extent, the fate of the litigation which ensues. I am not persuaded of the merit of that approach. An application pursuant to Order 15A is a discrete application and may never lead anywhere. There is no reason why a party which is out of pocket because of costs should await some indefinite future event." 24 Mr Gibson referred to decisions of the Federal Court in which costs orders of the kind advocated by ANZ had been made. 25 In Cappuccio v Australia and New Zealand Banking Group Limited [1999] FCA 1188, Burchett J said at [3] "that the costs order which would be appropriate in a case like this depends very much on the consequences of the discovery obtained". His Honour said at [3] that if proceedings were commenced following on preliminary discovery then it might be appropriate for costs to follow the event of those proceedings (and, at [4], his Honour said that it was appropriate that this be done). At [5], his Honour said that if no proceedings were commenced, then the applicant for preliminary discovery should pay the costs of that application. 26 His Honour's approach was adopted by Finkelstein J in SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271. His Honour there said at [32]: "As to the costs, I propose to order that, if an action for infringement is brought by the applicants (or any of them) against the respondents (or any of them) by 1 August 2001, the costs of this application be at the discretion of the court which hears that proceeding. If, on the other hand, no such action is brought within that period, then the applicants should pay the costs of the application for preliminary discovery. This approach is similar to that adopted by Burchett J in Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188." 27 Mr Gibson also relied on the decision of Tracey J in Newcrest Mining Limited v Apache Northwest Pty Ltd (No2) [2008] FCA 1663. However, his Honour's reasons appear to suggest that all he was dealing with was the costs of complying with a preliminary discovery order, and that costs otherwise should be reserved. 28 Mr Pritchard submitted, I think correctly, that there was no equivalent in the Federal Court Rules (or in the Federal Court of Australia Act 1976) of UCPR r 42.1. I proceed on the basis that this is so. That may provide some basis for distinguishing the approach taken in the Federal Court cases on which Mr Gibson relied, although I note that Burchett J did refer in Cappuccio at [4] to "the normal rule that costs follow the event". As to this: see also the decision of McHugh in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 at 624: "…as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order…" . 29 Clearly enough, r 42.1 has as its sphere of operation proceedings of an adversarial nature. Equally clearly, proceedings for preliminary discovery are not always truly adversarial in nature. However, as Simpson J said in Airways Corporation (and as Young CJ in Eq indicated in Panasonic) where proceedings for preliminary discovery are conducted in an adversarial fashion then r 42.1 dictates the general approach to be taken to the question of costs. Thus, I think, r 42.1 may provide a point of distinction between cases under the UCPR and cases under the Federal Court Rules, even though the practical effect of any such distinction would be limited. In any event, I would not (and did not) decide this application on the basis that there is such a distinction. 30 Mr Gibson also referred to the decision of Barrett J in Bio Transplant Inc v Bell Porter Securities Ltd [2008] NSWSC 694. His Honour there considered both the decision of the Court of Appeal in Totalise and the decision of Simpson J in Airways Corporation. However, his Honour held at [18] and following, the defendant had done no more than, in a practical or commercial sense, it was required to do to protect the interests of third parties and that, subject to this, it had "cooperated to the maximum extent practicable". Thus, his Honour ordered the plaintiff to pay the defendant's costs. His Honour did not adopt the approach taken by (for example) Burchett J in Cappuccio. Decision 31 Like Gyles J in C7, I am doubtful of the merit of an approach to costs which makes them depend on the initiation and outcome of litigation following preliminary discovery. I agree with his Honour that, ordinarily, an application for preliminary discovery should be regarded as a discrete application, and that the costs incurred in it should not "await some indefinite future event". In my view, that is consistent with the way that Barrett J proceeded in Bio Transplant, in that his Honour made an order having immediate rather than contingent operation. 32 Further, I agree with Simpson J that where an application for preliminary discovery is contested in an adversarial fashion, then the ordinary consequences of that decision should follow unless some good reason is shown why they should not. I do not regard what her Honour said as inconsistent with the approach taken by Barrett J in Bio Transplant. It is clear that his Honour did not regard the defendant's conduct of the proceedings as adversarial in nature. 33 In short, I think that:

(1) generally, it is better to deal with costs by making an order having immediate rather than contingent operation; and

(2) generally, where an application for preliminary discovery is dealt with in an adversarial fashion, the approach to costs should be that taken by Simpson J in Airways Corporation and Adams J in Hornsby Shire Council , and supported in general terms by Young CJ in Eq in Panasonic. 34 In my view, it is correct to say that ANZ conducted these proceedings in an adversarial fashion. It took every point that was fairly open. It is not to be criticised for doing so. However, having done so, it must live with the consequences; including as to costs. 35 In particular, I think, real insight into ANZ's conduct of its defence of the application, and its motives for doing so, can be gained from the "without prejudice" offer. By that offer, ANZ proposed, on certain terms, to produce items 1, 2 and 3 in category 1 of the discovery sought and item 4 in category 2. As I have said already, the categories are set out at [100] of my earlier reasons. I will not repeat them. It may be noted, however, that the documents that ANZ agreed to produce were in effect documents relating to the opening and operation of the accounts in question. The documents that it did not agree to produce included documents relating to payments out of the account, its policies and procedures relevant to certain defined matters and documents relating to irregularities, internal investigations and the like. 36 To my mind, one can infer from this that ANZ was prepared, notwithstanding its professed concern to maintain the confidentiality of its customers' documents, to produce those documents, although pursuant to a consent order; but was concerned to avoid producing its own documents. 37 It must have been perfectly obvious that the plaintiffs, and the investors whom they claimed to represent, had ANZ in their sights as a potential defendant. If that were not obvious at the outset, it would have become obvious once, on 6 February 2009, the plaintiffs identified the potential causes of action available to them. To my mind, it is legitimate to infer from the terms of the "without prejudice" offer that ANZ's principal concern was to avoid discovering its own documents, which might assist the plaintiffs in establishing a case against it. 38 As I have said, that was a legitimate decision for ANZ to take; and it was legitimate for ANZ to seek to defend the application for that reason. But it shows why, in my view, ANZ's conduct of the application ought properly to be regarded as adversarial. It shows also why, in my opinion, the consequences dictated by r 42.1 should follow. 39 As I have noted, Mr Gibson relied on the fact that the plaintiffs did not obtain all the documents that they sought, partly because of certain concessions made relatively late in the order of events and partly as a result of one of my rulings (on the fourth suggested cause of action on which the plaintiffs relied to justify their requests). However, even allowing for that, two things are clear:

(1) the plaintiffs obtained substantially more, by way of the Court's orders, than ANZ was prepared to offer; and

(2) the plaintiffs enjoyed substantial, although not complete, success on their application as, ultimately, it was framed. 40 In those circumstances, I do not think that it is appropriate to discount the costs otherwise payable as a result of the application of r 42.1. I do not think that the written submissions or evidence were substantially increased as a result of the matters on which the plaintiffs were unsuccessful; and the hearing finished comfortably within the day allotted to it. This is not in my view a case where it is appropriate to look at success and failure on allegedly discrete issues, and to apportion costs accordingly. 41 To the extent that submissions were extended, that was as much because of the extraordinarily detailed approach taken by ANZ and thus in the plaintiff's reply (a matter upon which I commented, although in neutral terms, at [26] of my earlier reasons). 42 As I have also noted, Mr Gibson relied on what he said was ANZ's willingness to negotiate, and the plaintiffs' unwillingness, as a circumstance bearing on the exercise of the discretion as to costs. I do not think that the plaintiffs should be disentitled because they rejected ANZ's offer. First, as I have noted, they have achieved substantially greater success. Secondly, the offer was subject to a condition that the plaintiffs and the investors whom they claimed to represent would "not seek further preliminary discovery after having reviewed the documents to be provided pursuant to the Proposed Orders". Thirdly, there is no reason to think that ANZ was prepared to compromise on what really was the heart of the dispute - the production of its own documents. 43 Finally, to the extent that Mr Gibson relied on the conduct of the proceedings and the relatively late serving of evidence and making of amendments, it is to be noted that the evidence was served, and the amendments were made, to accommodate points raised by ANZ in its written submissions. I do not think that the plaintiffs can be blamed for doing this. On the contrary, I think that it was appropriate for them so to act. I accept Mr Pritchard's submission that in substance, the shape of the application and the evidence in support were substantially "set" well before the last-minute flurry of activities following service of ANZ's submissions. 44 In this case, I saw no reason to make some order as to the whole, or any part, of the costs in question other than that dictated by r 42.1. Conclusion 45 It was for those reasons that I made orders, as to confidentiality and costs, in the form that I did on 12 August 2009.

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.