Bensons Property Group Pty Ltd v Commonwealth Bank of Australia Ltd
[2018] VSC 666
•9 November 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2018 00684
| BENSONS PROPERTY GROUP PTY LTD (ACN 063 470 833) | Plaintiff |
| v | |
| COMMONWEALTH BANK OF AUSTRALIA LIMITED (ACN 123 123 124) | First Defendant |
| AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) | Second Defendant |
---
JUDGE: | Kennedy J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 October 2018 |
DATE OF RULING: | 9 November 2018 |
CASE MAY BE CITED AS: | Bensons Property Group Pty Ltd v Commonwealth Bank of Australia Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2018] VSC 666 |
---
PRACTICE AND PROCEDURE – Proceeding for preliminary discovery to identify prospective defendant responsible for fraud - Documents provided by banks – Whether plaintiff ought be released from ‘Harman’ obligation so as to provide documents to police – Whether special circumstances – Order for release made.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Juebner | Tony Hargreaves & Partners |
| For the First Defendant | Mr C Archibald | Minter Ellison |
| For the Second Defendant | Dr O Bigos | HWL Ebsworth Lawyers |
HER HONOUR:
This is an application for the release by the applicant plaintiff of its obligations limiting its use of documents produced to it in this proceeding (otherwise known as the ‘Harman Undertaking’). In particular, the plaintiff seeks a release so as to provide documents to the Victorian Police, New South Wales Police and/or Federal Police in relation to an investigation of a fraud.
There are two issues in the case.
Firstly, whether or not the applicant should obtain the orders sought in circumstances where the two respondent banks neither consented to, nor opposed, the making of the order.
Secondly, there is an issue as to the appropriate costs order.
Relevant background
The plaintiff (Bensons) is a property developer who engaged the Marcus Group Pty Ltd (Marcus Group) as a builder on various projects. On 19 April 2018, Bensons received an email, purportedly from the Marcus Group, directing that a payment due to it be made to a particular Commonwealth Bank of Australia (CBA) account (Relevant CBA Account).
On 19 April 2018, Bensons made an electronic funds transfer of $917,900 to the Relevant CBA Account. It was later discovered that this was not an account maintained by the Marcus Group and that Bensons has been defrauded by person(s) unknown.
Upon the fraud being discovered Bensons reported the fraud to Victoria Police. Bensons shortly thereafter also determined (through enquiries with its own bank, Westpac) that the funds from the Relevant CBA Account were paid to an Australian and New Zealand Banking Group (ANZ) account (Relevant ANZ Account) in three separate tranches during April 2018.
On 6 August 2018, the current proceeding was issued against both CBA and ANZ seeking declarations that the banks held monies in the relevant bank accounts on constructive trust. Ancillary orders were also sought pursuant to r 37A.03 to obtain documents eliciting information relating to assets which might be the subject of a freezing order.
On 7 September 2018, orders were made for the defendant banks to provide relevant documents concerning the Relevant CBA Account and Relevant ANZ Account.
By further orders made on 5 October 2018, the defendants were ordered to make discovery of further documents. The plaintiff also was given leave to amend its writ to convert the proceeding into an application for preliminary discovery to identify a prospective defendant pursuant to r 32.03.
On 5 October 2018, the plaintiff also made the present application (to seek a release from its implied undertaking). Although the plaintiff expressed readiness to make the application, the banks generally indicated opposition at that time, providing a time estimate of some 1 to 2 hours for the hearing of the application.
In the result, the matter was adjourned for a further special fixture with orders made by consent for provision of further documentation and exchange of written submissions.
Documents produced
The documents produced include documents associated with the opening of the accounts; bank statements; and money transfers. They also include screen shots which detail the flow of funds, including the ultimate flow to the UK.
By way of summary, the documents show that:
·On 29 March 2018, Mr O’Brien incorporated a company, Densford Civil Constructions Pty Ltd (Densford), of which he was the sole director.
·Mr O’Brien then caused Densford to open the Relevant CBA Account and Relevant ANZ Account, of which he was the only authorised signatory.
·On 19 April the sum of $917,900 was credited to the Relevant CBA Account.
·On 20 and 24 April 2018, Mr O’Brien attended the Seven Hills Shopping Centre, CBA branch, and requested that the funds in the Relevant CBA Account be transferred to the Relevant ANZ Account (in New South Wales), which was thereby effected (and effectively exhausted the funds in the Relevant CBA Account).
·Subsequently, Mr O’Brien arranged for the funds to be transferred from the Relevant ANZ Account in four separate transactions: first, $422,258.77 to Retiva Investments Ltd into an account with Union Bank UK Plc; secondly, $36,719 to Robert Aziz into a CBA account in Fairfield, Victoria; thirdly, $438,890.98 to Caerus Investments Ltd into an account with Santander UK Plc; fourthly, $18,928 to Robert Aziz into a CBA account in Fairfield, Victoria.
·On 26 April 2018, Mr O’Brien himself made a $1,000 ATM withdrawal from the Relevant ANZ Account at the ANZ Seven Hills branch ATM (thereby effectively exhausting the funds in that account).
The plaintiff has also obtained transcript of a telephone conversation between an ANZ fraud investigator and Mr O’Brien.
In the course of this conversation Mr O’Brien:
(a) admits to allowing the incorporation of Densford under his name;
(b) admits to receiving around $1 million in funds from the United Nations which he said was sent to purchase machinery for the United Nations;
(c) states that he was instructed to pay invoices for equipment which he believed had originated from the United Nations;
(d) admits attending the ANZ ATM at the Seven Hills branch and withdrawing $1000, which he said was to reimburse him for the costs associated with incorporating the company; and
(e) states that he was assisting what he believed to be the United Nations so that he could collect his inheritance from an overseas benefactor (which would otherwise be blocked by the United Nations).
On 25 July 2018 Mr Curtis, managing director of Bensons, spoke with a Detective Senior Constable Blake Fischer of Victoria Police who advised him that the investigation file relating to the matter had been referred to Sydney (NSW Police). Detective Senior Constable Fischer however was unable to provide any further information due to the ongoing nature of the current investigation.
Mr Curtis spoke again with Detective Senior Constable Fischer of Victoria Police on 17 October 2018. Detective Senior Constable Fischer advised him:
(a) Victoria Police has not received any further information or documents relating to the fraud committed upon Bensons;
(b) Victoria Police has not received any reports or documents from the NSW Police;
(c) Since the matter was referred by Victoria Police to the NSW Police, Detective Senior Constable Fischer has not been advised of the relevant NSW Police Incident Number applicable to the investigation nor has he been given the name of the police officer handling the matter in NSW.
The court was advised at the hearing of this application that on 22 October 2018 Mr O’Brien was notified of the nature of this application and the date of the hearing.
Despite this, Mr O’Brien did not participate in the hearing, and did not attempt to file any documentation in relation to the orders sought.
Principles
The principles were generally not the subject of dispute between the parties.
Thus, as conceded by the plaintiff, the documents produced were subject to the principles underpinning the ‘Harman Undertaking’ as set out by the High Court in Hearne v Street (Hearne)[1], as follows:
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits. (citations omitted)
[1](2008) 235 CLR 125, 154-155 [96].
This statement of principle is derived from the decision of the House of Lords in Harman v Secretary of State for Home Department (Harman).[2] The court in Hearne however, pointed out that the expression ‘implied undertaking’ may be misleading because ‘in truth it is an obligation of law’.[3]
[2][1983] 1 AC 280, 304-305.
[3]Hearne (2008) 235 CLR 125, 156-157 [102].
The rationale for the imposition of the obligation is to ensure that privacy and confidentiality are not invaded more than is absolutely necessary for the purpose of doing justice.[4]
[4]Ibid 158-159 [107]; Minister for Education v Bailey (2000) 23 WAR 149, 156 [25]–[27].
The undertaking may be released or modified by a court; however, such an exercise is not undertaken lightly. For current purposes the relevant circumstances relied upon are where the applicant is able to demonstrate ‘special circumstances’.[5] As recently stated by Vickery J in Ambridge Investments Pty Ltd v Baker (No 3):[6]
However, in approaching a determination as to whether “special circumstances” are present in a particular case, consistently with the applicable case law as it has developed to this point, I would vary a little the formulation of Wilcox J in Springfield, to arrive at the following test: “special circumstances” may arise where there are special features (or a special feature) of the case which afford good reason for modifying or releasing the undertaking, being circumstances which are of sufficient gravity to override the private and public interest in protection of the confidentiality of a person’s private documents which are required by law to be produced to a court.
[5]Deputy Commissioner of Taxation v Karas [2012] VSC 143, [23].
[6][2010] VSC 545 [33].
Various other formulations have been suggested. For example, that it be ‘plainly in the interests of justice’,[7] that it is ‘just to do so’[8] and/or that ‘good reason must be shown’.[9] However, it does not require ‘some extraordinary factors’ before the discretion is exercised.[10]
[7]Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd [2011] 1 Qd R 145, 150 [16].
[8]Andrew Koh Nominees Pty Ltd v Pacific Corporation Limited (No 2) [2009] WASC 207 [14].
[9]Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283, 289 [31].
[10]Ibid.
Courts have recognised that there can be a public interest in favour of disclosure in respect of information that is relevant to the investigation and prosecution of a criminal offence, which can override the public interest in the administration of justice in the preservation of the confidentiality of discovered documents.[11]
[11]Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476 ; Andrew Koh Nominees Pty Ltd v Pacific Corporation Limited (No 2) [2009] WASC 207 [17]; Websyte Corporation Pty Ltd v Alexander [2012] FCA 69 [14]-[15].
In exercising the discretion, the relevant factors include:[12]
[12]North East Equity Pty Ltd v Goldenwest Equities Pty Ltd [2008] WASC 190 [43] citing Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476; Andrew Koh Nominees Pty Ltd v Pacific Corporation Limited (No 2) [2009] WASC 207 [17(c)].
(a) the nature of the offence alleged;
(b) the cogency of the evidence sought to be adduced in support of it;
(c) the authority to which the documents are sought to be disclosed;
(d) the manner of the authority's intended use and the possibility of misuse by that authority;
(e) any prejudice, actual or potential, which may be occasioned to the respondent by the disclosure; and
(f) whether the application has been brought for some personal advantage or improper purpose rather than to advance the public interest.
Defendants’ attitude
As indicated already, the defendants neither consented to nor opposed the orders sought. They nevertheless sought to make both written and oral submissions to the Court.
The CBA stated:
Having begun a proceeding in this Court, Bensons has immediately sought to deploy the documents for police assistance. In seeking to justify that course, it appears to conflate the public interest in resolving its private claims (and the exceptional orders it obtained compelling production of documents after notifying police of its complaint) with the public interest in authorities investigating and pursuing any offences.
In oral submissions Counsel for CBA further made reference to the unusual way the proceeding had been instituted with no reference to how the plaintiff proposed to advance its own civil claims. Particular reference was also made to a passage from Lee J’s decision in Bailey v Australian Broadcasting Corporation[13] (Bailey) which highlighted that there is a distinction to be made between offences which involve infringement of private or individual rights and offences which it may be in the greater public interest to uncover.[14] Counsel however fairly accepted that there was prima facie evidence of fraud[15] and that no prejudice to the bank could be identified.[16] Further, that he did not say the material was incapable of supporting the orders sought.[17]
[13][1995] 1 Qd R 476.
[14]Ibid 489.
[15]Transcript of Proceeding (31 October 2018) 67.
[16]Ibid 56.
[17]Ibid 60.
Counsel for ANZ submitted that the court ought to exercise caution before acceding to the plaintiff’s application, especially given:
(a) the bank’s duty of confidentiality which attaches to the document;
(b) the ability of the plaintiff to provide some documents to the police and for the police to invoke the established procedure of issuing search warrants; and
(c) the potential precedent that such an order would create.
In oral submissions Counsel for ANZ queried the utility of the orders for either civil or criminal proceedings.
Again, however, it was accepted that there was at least prima facie evidence of a fraud[18] and further that no prejudice was identified.[19]
[18]Ibid 85.
[19]Ibid 86-87.
Resolution
In terms of relevant factors, first, the potential offences in this case are extremely serious involving a monetary sum of some $1 million. They include theft, obtaining financial advantage by deception, falsification of documents and knowingly deal with proceeds of crime. Such offences involve punishment of a maximum of some 10 to 15 years imprisonment.[20]
[20]Crimes Act 1958 (Vic) ss 72, 74, 82, 83A, 194.
Further, notwithstanding that the plaintiff may at this stage be described as the ‘sole victim’, such that the offence may be seen as a ‘private one’ within the terminology in Bailey, this will not necessarily be determinative. In this case, it is also relevant to consider that the sum is substantial; the offences have international aspects; and further that the conduct involves a high degree of sophistication (which matters were generally accepted by Counsel for CBA[21]).
[21]Transcript of Proceeding (31 October 2018) 70.
Second, the documentation obtained identifies the flow of funds, including to overseas account holders. It is thereby cogent and of potential benefit to any investigation.
Third, the various police agencies are also clearly the appropriate authorities to whom to provide the documents, and it was not suggested that there was any possibility of misuse by those authorities.
Fourth, as highlighted already, it was accepted that there was no prejudice to CBA or ANZ in the provision of the documents.
Finally, although there may be an incidental benefit for Bensons in terms of any future civil litigation, I am generally satisfied that the order will serve a broader purpose in assisting an investigation into large-scale electronic fraud.
In terms of the other matters raised by the defendants, although it is true that the proceeding is currently constituted as an application for preliminary discovery, the plaintiff had originally issued the proceeding with the apparent intention of obtaining information to identify assets that might be frozen. As highlighted by Counsel for the plaintiff, as the extent of the fraud was discovered, the plaintiff responded by reconstituting the proceeding (taking the view that it could not yet proceed against any particular individual) and also bringing the current application.
There is nothing improper in this course adopted by the plaintiff, particularly given it had already reported the matter to police. This may also be distinguished from the situation in Websyte Corporation Pty Ltd v Alexander[22] where a similar application was refused in circumstances where the applicant chose to apply for a search order rather than taking the matter directly to the police (only going to the police after obtaining incriminating documentation through the civil process).
[22][2012] FCA 69, especially at [23].
Secondly, although it is true that the duty of confidentiality will be somewhat eroded, that will be true in any case where an exception is identified. It is significant in this context, however, that Mr O’Brien, whose privacy may be most directly affected, has chosen not to participate or make submissions against the making of the orders.
Next, there is nothing to suggest that the police will issue search warrants given the state of the investigation to date. I am also generally satisfied that the order is necessary since the production of court orders, or even the first affidavit, is of very limited use to a police investigation absent the further documentation now provided.
Finally, insofar as a precedent issue is concerned, the current matter turns on its own facts. On the basis of the material before me in this particular case, I am satisfied that the balance weighs in favour of the making of the order.
Summary
Taking into account the evidence before me I am satisfied, as a matter of discretion, that it is appropriate to make an order for modification of the implied undertaking given the existence of special circumstances.
Costs
In circumstances where this proceeding is now to be dismissed, it was accepted that the plaintiff ought generally pay the defendants’ costs of the proceeding. However, the plaintiff sought to carve out the costs of and incidental to this current application. In particular, the plaintiff highlighted that the order might have been made without the need for a further hearing after 5 October 2018 save for the position taken by the defendants.
There are two competing principles here. The plaintiff has been successful in its application which suggests that costs ought follow the event. However, as described by Counsel for ANZ, a party who seeks an indulgence may be generally ordered to pay the other party’s costs.[23]
[23]GE Dal Pont, Law of Costs (LexisNexis Butterworths, 2nd ed, 2009) 438.
I accept that the plaintiff was seeking an indulgence in seeking modification of its obligations. Nevertheless, the principle cited by Counsel is not inflexible. The Court may also have regard to whether costs were unnecessarily incurred,[24] as well as the overarching principle contained in the Civil Procedure Act 2010 (Vic).
[24]Ibid 439.
Although it was necessary to incur some costs in the making of the current application, I consider that the application could have been dealt with in relatively short compass at the directions hearing on 5 October 2018. Sufficient was known at that time to facilitate the just, efficient and cost-effective resolution of the application without need of a special fixture of some half a day. However, the initial opposition on the part of the banks led to the further listing of the matter with the addition of further costs.
I am not satisfied that the banks ought be penalised for the actions taken which they were entitled to take given their apparent concern for the precedential value of this decision.[25] However, equally, I do not consider that the extra time taken ought be imposed on the plaintiff.
[25]See for example, Transcript of Proceeding (31 October 2018) 64.
Rather, I am satisfied that the costs incurred after 5 October 2018 ought lie where they fall.
Accordingly, an order will be made that the plaintiff pay the defendants’ costs of the proceeding save for the costs of and incidental to this application incurred after 5 October 2018.
Conclusion
The following orders will be made:
1. As a modification of the Applicant's obligation limiting its use of documents produced to it in the proceeding, the Applicant, by its servants and agents, may provide the following to Victoria Police, New South Wales Police and/or Australian Federal Police (hereafter Relevant Law Enforcement Authority):
(a) copies of pages 18 to 65 of Exhibit PB-2 (other than pages 46-54 and 55.1-56) to the affidavit of Peter Anthony Brown sworn 4 October 2018;
(b) copies of the Second Respondent's documents which were provided by internet link by email from Emily Hunt to Peter Brown, which email is exhibited at Page 79 of PB-3 to the affidavit of Peter Anthony Brown sworn 22 October 2018, together with the transcript of the telephone conversation between Mr O'Brien and a representative of the Second Respondent on 2 May 2018;
(c) any information derived from the documents referred to in either or both of sub-paragraphs (a) and (b) above.
2. Within 5 business days of the provision of any document referred to in paragraph 1 to a Relevant Law Enforcement Authority, the Applicant shall advise the Respondent who produced the document to the Applicant in this proceeding in writing:
(a) of the description of the document provided to the Relevant Law Enforcement Authority;
(b) to which Relevant Law Enforcement Authority the document has been provided.
3. The plaintiff is to pay the defendants’ costs of the proceeding, save for the costs of and incidental to the plaintiff’s application to be released from its ‘Harman’ obligation incurred after 5 October 2018 (which costs should lie where they fall).
4. The proceeding is otherwise dismissed.
7
0