Australia and New Zealand Banking Group Limited v ANZCover Insurance Pty Ltd (No 4)
[2006] VSC 21
•30 January 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2073 of 2003
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) | Plaintiff |
| v | |
| ANZCOVER INSURANCE PTY LTD (ACN 082 275 125) & ORS | Defendants |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 January 2006 | |
DATE OF RULING: | 30 January 2006 | |
CASE MAY BE CITED AS: | Australia and New Zealand Banking Group Limited v ANZCover Insurance Pty Ltd (No. 4) | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 21 | |
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Practice and Procedure – Late delivery of witness statement – Witness statement relevant to issues – Whether order should be made preventing the plaintiff from relying on witness statement – Whether trial date should be vacated.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A.J. Myers QC with Ms C. Kenny | Clayton Utz |
| For the Defendants | Mr J.H. Karkar QC with Ms Wendy Harris | Ebsworth & Ebsworth |
HIS HONOUR:
Before the court is an application brought on behalf of the defendants by summons filed on 13 January 2006. The relief sought arises from the fact that on 20 December 2005 the plaintiff delivered a witness statement of Manaj Kumar Rakshit dated December 2005 with a view presumably of this being relied upon as part of the material on behalf of the plaintiff in this proceeding. The trial is due to commence on 6 February, next Monday.
The defendants in their application asks for an order that the plaintiff be not permitted to ely upon Mr Rakshit's statement on the basis that it is well out of the time frame permitted in the directions given for the trial and that it opens up a new issue. Alternatively, the defendants seeks an order that the trial date be vacated and that the plaintiff pay the costs thrown away.
I have indicated in the course of argument that it would not be appropriate that I should deny to the plaintiff the right to rely upon evidence of a witness which is relevant notwithstanding that it be filed late. Accordingly, the focus on this application shifts to the trial date - whether it should be kept or whether it should be vacated. The consideration that I have regard to in determining that issue is whether the delivery of the statement, having regard to its content and its timing, is such that a fair trial cannot be given to the parties, and in particular the defendants, of the issues that are to be heard at the forthcoming trial.
I made it clear to counsel for the defendants that there were many tools and strategies available to avoid or minimise the prejudice which their client might otherwise suffer. This is to be a long trial and cross-examination of witnesses on the new issues can or may be deferred until they have full instructions. I have the power to direct the order in which the plaintiff’s witnesses might be called. Any answering evidence by the defendants might also be deferred. Generally, I would listen with sympathy to any procedural modifications which the defendants might seek, to alleviate any apprehended disadvantage.
The case involves a very large sum of money. The statement of claim seeks orders which speak of $130 million. The claim by the plaintiff essentially appears to be a claim brought under an insurance policy pursuant to which the defendants agreed to indemnify the plaintiff bank or its predecessor ANZ Grindlays, against certain losses. The pleadings are voluminous and complex. The statement of claim runs to some 80 pages and the defence to somewhat more.
I have been managing this case since October 2003, when it commenced, and have a familiarity with the interlocutory processes. The case has been managed as a commercial list case and accordingly the practices and procedures available to cases in that list apply. It has been subject to judicial direction throughout its interlocutory stages. All of this makes it very surprising that the case has taken a shift in direction, as it appears it has, at this very late stage.
The plaintiff’s claim, as it is originally pleaded, is pleaded in a way which, I must say, seems to me fairly coy; in paragraph 42 of the current statement of claim the various terms of the policy are set out and then in paragraph 44 it simply asserts an entitlement to indemnity. The factual basis which caused the term of the policy to give rise to that indemnity is never expressly spelt out. The provision currently under consideration, and there are others in the litigation, is insuring clause 4A which, under the terms of the policy as appears in the plaintiff's pleading, will give to the plaintiff indemnity for losses for fraudulent claims in respect of which they assured in good faith and in the course of business acted or relied upon securities which proved to have been fraudulently raised. I omit the parts of the clause which do not appear to bear upon this issue.
Given that the plaintiff bears the burden of proving all these matters it is somewhat surprising, as counsel for the defendants has pointed out, that, when these allegations first appeared in earlier manifestations of this pleading, there was a resistance by the plaintiff to spell out what facts were relied upon as constituting the entitlement. In particular, in this case, what is said to be the fraudulent raising of the securities.
The case, as it was so presented, was given a little bit more life by an amendment, which appeared as recently as last August, which introduced a number of new paragraphs into the statement of claim and deleted others. Included in these new paragraphs was paragraph 73A which it is said exposes the issue of fraud. This paragraph alleges that, as at a particular date and thereafter, an insuring event had arisen and that a right to indemnity arose by reason of the facts which are then set out. These include the fact that the cheques in question were forged and/or fraudulently raised and/or fraudulently altered and/or fraudulently presented or negotiated. It now appears that those allegations are somewhat less fully relied upon because it is now said, not that the cheques were fraudulently altered, perhaps were fraudulently presented or negotiated, but the focus is on the fraudulent raising of the cheques in question.
An interesting aspect of paragraph 73A is the opening words about which little was said this morning, namely that the insuring event had occurred as at the date of 29 June 2000 letter. That is a letter which, according to the pleading, relates to the prospect of settlement. So that the issue in paragraph 73A appears to be, not so much directed to the entitlement to indemnity, but rather to the entitlement to the indemnity associated with the settlement which was achieved between the plaintiff and the National Home Bank, NHB, back in 2000 or shortly thereafter.
Now, all of this is a cause for concern in terms of the way the plaintiff's case is presented. I have had the benefit this morning of much assistance from senior counsel from the plaintiff who has explained how it is that the plaintiff puts this part of its claim. In the particulars given under paragraph 73A, the assertion is made that the fraudulent nature of the cheques was to be proved by the tender of the findings of the Special Court constituted by Justice Shah in India on 27 April 2005. What has happened since August 2005 is, first, that new senior counsel has come into the case and secondly that the witness statement of Mr Rakshit has emerged.
It has been brought to my attention, and it is a matter of some significance, that when this matter was mentioned before me on 16 December last and various matters were debated, some contentious and others of an administrative nature with a view to this trial going ahead, counsel for the plaintiff said, and I quote: "We have one witness statement which will be delivered on Monday, Your Honour, it is simply a witness statement which exhibits or formally proves a number of bankers records".
In fact two witness statements were delivered, one of which related to bankers records and the other is the affidavit or the statement of Mr Rakshit. It is a matter of concern that the pending delivery of that witness statement was not disclosed at that time. So it is that that is the situation which then arose and on 20 December, Mr Rakshit's statement was simply delivered without, I think, much apology or explanation. Indeed I am invited to infer that it reflects a new view of the case taken by counsel who has recently come in. The burden of Mr Rakshit's statement I am told is that he shows that the cheques in question were in fact incorrectly entered in the accounts of NHB so as to give rise to the conclusion, that will be contended for in due course, that the cheques were fraudulently raised.
Faced with this change in direction, and I think it must be accepted that it is a change in direction in terms of the presentation of the plaintiff's case, the response of the defendants is also surprising. Having received the new statement on the eve of Christmas, that is to say a few days before offices closed down, presumably it was digested and then on 13 January the summons for directions was issued returnable before the duty judge in the Practice Court on 17 January. It was supported by a lengthy submission and an affidavit of Mr Boyd. It came on before Justice Osborn who took the view that this was a matter which he would not vacate the trial date but would refer it to me as the trial judge to entertain this application which I now do.
Again, the case is supported by a lengthy submission of some 37 pages in which the position of the defendants is set out. The submissions contain a long history of default or suggested default on behalf of the plaintiff which I think, although it sets a background, does not really bear upon the issue before me. I remind myself again that the issue is not whether one party has been delinquent in the past but whether the delivery of the witness statement makes a fair trial of the issues impractical.
Of significance in the submission is the defendant's perception of the relevance of the statement of Mr Rakshit which reads as follows:
“The evidence sought to be led from Mr Rakshit is directed to showing that the transactions recorded in NHB’s books between ANZ Grindlays and NHB, to which the disputed cheques were supposedly related, were fictitious, apparently in order to establish that the cheques were fraudulently raised, presented or negotiated. Despite NHB’s initial assertion to the contrary, it was, in fact, common ground at the arbitration between NHB and ANZ Grindlays – and never thereafter in dispute – that there were no transactions between NHB and ANZ Grindlays to which the cheques related. However – and critically – the fact that there were no transactions between NHB and ANZ Grindlays does not mean that the cheques were issued fraudulently. On the contrary, there could be no question of fraud if, as ANZ Grindlays itself contended before the arbitrators, the cheques were issued in respect of transactions between NHM and Mehta – ie, the proceeds of the cheques were intended by NHB for Mehta as consideration for transactions between NHB and Mehta on a principal to principal basis.”
For my purpose it appears to be common ground that there were no transactions between NHB and ANZ Grindlays to which the cheques related. The issue which the defendants it seems would argue, although the submission is again oblique on this point, is this: "However and critically the fact that there were no transactions between NHB and ANZ Grindlays does not mean that the cheques were issued fraudulently." The submission goes on to say: "On the contrary there could be no question of fraud if, as ANZ Grindlays itself contended before the arbitrators, the cheques were issued in respect of transactions between NHB and Mehta. That is the proceeds of the cheques were intended by NHB for Mehta as consideration for transactions between NHB and Mehta on a principal to principal basis."
Now, I note that it is not said that this is what the defendants in this case are going to contend but just theoretically if it were contended then there would be no fraud. Now, that's the position, it would seem, as the defendants see it. So, it is not altogether clear from the defence position where this statement of Mr Rakshit takes them and what position they are going to be adopting. I am mindful too, as I have already pointed out, that the way the case has been pleaded for the plaintiff puts the plaintiff's position, until I had the benefit of counsel's elucidation this morning, in a state of uncertainty. The consequence of that is that the defendants have never really pleaded in black and white terms to the specific allegation of fraud which the plaintiff would have the court accept.
Now, the Rakshit witness statement is late; it changes the way the plaintiff's case is presented. The defendants then say, that they need to investigate these matters; to look at a lot of documents. It could not possibly be fair for it to be forced to go on with this trial. Even if modifications were made to the sequence of witnesses and the like, it could not get a fair trial. Counsel for the plaintiff points out that there is not any evidence of this, merely assertions. I can understand that there will very often be difficulties in a trial where a case takes a new turn at a fairly late stage. This may be particularly so where witnesses are overseas and perhaps where the defendants are insurers who were not party to the litigation between the banks in India and in any event may or may not have had full information about these matters.
My difficulty is that counsel for the plaintiff says, well, that is nonsense, these events have been picked over during the last 15 years in litigation in India; the defendants have been put on notice and have received reports of the Indian proceedings from time to time. Counsel for the defendants say he has looked at the reporting letters and they have not contained this information. Counsel for the defendants say, we have not got the documents which were the basis of the Indian proceedings. Counsel for the plaintiff says, yes you have, they have all been discovered. Counsel for the defendants say that the new statement shifts the ground of this case. Counsel for the plaintiff says that is not so for the issue which the defendants say has been introduced has nothing to do with the allegations which the plaintiff is now making. My difficulty, faced with these assertions and counter-assertions from the Bar table, is that it is impossible for me, even with my familiarity of the case, to form any view as to what are the rights and wrongs about the significance of the shift and as to its ramifications to this trial. I am mindful that the case has been hard fought over the three years that I have managed it. It has been fought, in my perception, on a very acute tactical basis. I am not able to say that the present application is or is not the product of difficulties which the defendants say they have encountered.
Now, given the contradictory assertions from the Bar table I have a natural reluctance to accept one or other, bearing in mind that the consequence of my so accepting one means that I don't accept senior counsel's statement to the contrary. This puts me in a very difficult position.
I enquired of counsel for the defendants, since they have had this new material for a month or more, what has been done to address it. The impact of their answer is, it would seem, that nothing has been done. No inquiries appear to have been made in India, no inquiries appear to have been made as to the documents which may bear upon the issues which the defendants say they may or may not want to raise. This causes me grave concern.
With some hesitation I have decided that the fair solution in this case is to defer the matter. Let the case start on Monday; let counsel for the plaintiff open their case; let me hear what evidence is going to be called; let me hear how the plaintiff's case is to be put. Let counsel for the defendants then open their case; let them put the issue which is now sought to be raised in its proper context and explain to me how it is that the new issue is one which causes real difficulty. Then I shall be able to assess the significance of this change of direction by the plaintiff in the light of things as they stand forensically.
I am mindful of the fact that Mr Rakshit's evidence, while it produces a lot of documents, does not really come out and say fairly and squarely that the cheques were raised fraudulently. It may well be that that is implicit in what he says and I think the better course is for me to wait and hear how counsel open their case. If, as may be the case, that this proof is really a second or third string to the plaintiff's bow and that this new evidence is of minor significance in the context of the case, then that might also be a factor which I should have regard to.
I therefore propose to simply adjourn the application. I will not grant the vacation of the trial date but I will invite counsel for the defendants, if so minded, to renew the application at the end of the openings and before witnesses are called. I am mindful that this imposes a financial burden upon the parties and I would be loathe to impose that. But in the context of the amount at stake and the consequences of the vacation of the trial date, which is that the trial would have to go over for a period in excess of 12 months, it seems to me that that cost might not loom so large as it might in another case. In any event if the adjournment is allowed then the question will arise as to who should bear the costs thrown away, so perhaps that may not be so significant in the long term.
Unsatisfactory as it may seem, that is the course that I propose to follow. The application will be stood over until the conclusion of the openings.
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