Petrochemical Commercial Company International Ltd v Commonwealth Bank of Australia

[2019] NSWSC 849

Supreme Court

New South Wales

Medium Neutral Citation:	Petrochemical Commercial Company International Ltd v Commonwealth Bank of Australia [2019] NSWSC 849
Hearing dates:	4 July 2019
Date of orders:	04 July 2019
Decision date:	11 July 2019
Jurisdiction:	Equity
Before:	Slattery J
Decision:	Orders made permitting the use of the requested information and documents in the Malaysian proceedings, but upon terms that the plaintiffs seek to maintain as confidential identifying information about persons against whom there is no evidence of wrongdoing in the Malaysian proceedings.
Catchwords:	DISCOVERY – equitable discovery – production of documents and information sought in proceedings in Australia to aid the prosecution of civil proceedings in Malaysia – the Malaysian proceedings seek the recovery of large sums of money alleged to have been misappropriated from the plaintiffs in a fraudulent conspiracy and then distributed from Malaysia to a number of other countries including Australia – the defendant bank in Australia agrees to orders for equitable discovery and will consent to the production of the documents and information sought – once the documents are produced by the defendant bank the plaintiff seeks release from its obligations under Harman v Secretary of State for the Home Department [1983] 1 AC 280 not to use the documents and information for purposes unrelated to these proceedings and specifically to enable their use in the Malaysian proceedings – not all the documents and information produced on equitable discovery relates to or identifies alleged conspirators in the fraud alleged in the Malaysian proceedings – on what terms should the Harman undertaking be released in the circumstances – what steps should be taken to protect the identity and confidential information of potentially innocent third parties.
Legislation Cited:	Supreme Court Act 1970, s 23 Uniform Civil Procedure Rules 2005, rr 1.4 and 25.12
Cases Cited:	Bankers Trust Co v Shapira [1980] 1 WLR 1274 Breen v Williams (1996) 186 CLR 71 Computer Share Ltd v Perpetual Registrar Limited (2000) 1 VR 626 Harman v Secretary of State for the Home Department [1983] 1 AC 280 Norwich Pharmacal Co. & Others v Commissioners of Customs and Excise [1974] AC 133
Category:	Procedural and other rulings
Parties:	First Plaintiff: Petrochemical Commercial Company International Ltd Second Plaintiff: PCCI Limited Third Plaintiff: Navak Asian Kish Trading Co (PJS)   Defendant: Commonwealth Bank of Australia
Representation:	Counsel: Plaintiffs: J. Buncle Defendant: T. Bunker (solicitor)   Solicitors: Plaintiffs: John Mitchell, Arnold Bloch Leibler Defendant: Anna Lenahan, Commonwealth Bank of Australia
File Number(s):	2019/17378
Publication restriction:	No

Judgment

1. The three corporate plaintiffs conduct or support businesses to broker the sale of petrochemical and oil products, and to provide logistics and services to transport those products through shipping storage tanks and warehousing. They claim in proceedings, brought in the High Court of Malaysia in Kuala Lumpur in December last year, that they have been defrauded by a complex conspiracy involving at least 14 companies and individuals who are named as defendants in those Malaysian proceedings. The plaintiffs allege that the defendants engaged in a fraudulent scheme to misapply and then launder the sum of US$71 million of the plaintiffs’ funds from a US dollar-denominated account held by Nexus Management Group (“Nexus Management”) at the Bank Islam Malaysia Berhad (“BIMB”).

2. The allegations in the Malaysian proceedings are complex and need not be repeated here in detail. But it is claimed that either by the negligence or active involvement in the conspiracy of employees of persons at Nexus Management and the Asian Trade Investment Bank Limited and a number of other individuals, mainly based in or originating in Iran, that the USD$71 million was transferred to bank accounts in Cyprus, Canada, the United Kingdom and Australia. The plaintiffs obtained worldwide injunctions to attempt to secure these funds.

3. Some of the funds transferred were transferred to the Commonwealth Bank of Australia (“CBA”), the defendant in these proceedings. It is not suggested the CBA or any of its employees were part of this conspiracy.

4. The plaintiffs now seek equitable discovery from the CBA in these proceedings. The plaintiffs seek to obtain documents and information that will reveal customer identification details that were used by the account-holders and signatories to open and transact with the CBA accounts , which were used to receive the allegedly stolen funds. The plaintiffs’ dominant purpose in seeking to obtain these documents and information is to further trace the plaintiffs’ missing funds, to confirm the involvement of the parties to the Malaysian proceedings in the transactions in misappropriating the plaintiffs’ funds and to obtain further information to decide whether certain non-parties and entities should now be joined as parties to the Malaysian proceedings.

5. As to the last of these objectives, the principal affidavit in support of the plaintiffs’ claim, an affidavit of Kamal Zangeneh of 16 January 2019, indicates that, in addition to the 14 named defendants to the Malaysian proceedings, there is evidence that another group of individuals may have been involved in the conspiracy. But these other individuals have not yet been joined as defendants to the Malaysian proceedings. Investigations in relation to them are ongoing.

6. The CBA has consented to the orders for equitable discovery, which if made provide to the plaintiffs the customer identification details used by the account-holders and signatories to open and transact on the suspect CBA accounts.

7. But before making those orders, two matters require short consideration: whether the orders should be made in light of the plaintiffs’ disclosures; and, the terms on which the orders should be made on the available evidence. The first of these is reasonably straightforward, but the second requires some amendment to the terms proposed by the plaintiffs.

8. The plaintiffs proposed that the Court make the following orders:

1. Pursuant to rules 1.4 and 25.12 of the UCPR, the principles in Norwich Pharmacal v Commissioners of Customs and Excise [1974] AC 133 and the principles in Bankers Trust Co v Shapira [1980] 1 WLR 1274, the Defendant, by no later than 21 days from the date of this order, make discovery to the Plaintiffs (where available) any identity document provided to the Defendant at or around the time of opening each of the accounts listed in Annexure A of the Affidavit of Jyotshna Bastola affirmed 12 February 2019, for the purpose of the Defendant confirming the identity of each account holder or signatory in relation to each account.

2. The Plaintiffs are released from the implied undertaking pursuant to the principles in Harman v Secretary of State for the Home Department [1983] 1 AC 280 not to use documents and information obtained as a result of Order 1 above for the purpose of the proceedings in Malaysia identified in paragraph 12 of the affidavit of Kamal Zangeneh affirmed on 16 January 2019 (Malaysian Proceedings).

3. The Court grants leave to the Plaintiffs to use the documents produced pursuant to Order 1 above for the purpose of the Malaysian Proceedings.

4. The Plaintiffs to pay the Defendant’s reasonable costs of complying with Order 1, as agreed or as assessed.

5. Liberty to apply on 3 days’ notice.

The Three Plaintiffs and Trade Sanctions On Iran

9. Since 2011, the first plaintiff, Petrochemical Commercial Company International Ltd ("Petrochemical"), has 100 per cent indirectly owned by the Parsian Oil and Gas Development Company, a publicly listed company on the Tehran Stock Exchange (“Parisan Oil”).

10. Petrochemical was incorporated in Jersey in the Channel Islands on 30 September 2002. On 3 November 2011, it was registered in Labuan, Malaysia. This change was initiated as a result of the imposition of sanctions on the sale of oil by Iran, published by the US Office of Foreign Assets Control (“OFAC”), which made it difficult for Petrochemical to continue to conduct its business in Jersey.

11. As a result of international events that are well-known, on 16 January 2016, trade sanctions on Iran were lifted as a result of the Joint Comprehensive Plan of Action made between Iran and members of the United Nations Security Council and the European Union.

12. The second plaintiff, PCCI Limited ("PCCI"), was incorporated in Labuan, Malaysia on 11 June 2014. It acts as a trust company on behalf of Petrochemical.

13. The third plaintiff Navak Asia Kish Trading Co ("Navak"), was incorporated in Iran on 30 August 2011. Navak is a general commercial trading company and its main business is the sale and purchase of petrochemicals and aromatics, all products polymers, liquefied petroleum gas and chemical fertilisers. Where required, it also supplies its customers with logistics, services such as shipping, storage tanks and warehousing. Navak is 100 per cent indirectly owned by Parsian Oil.

14. But on 5 November 2018, OFAC was instrumental in reimposing trade sanctions on Iran. As part of this action it reinstated some sanctions on Petrochemical and imposed sanctions on the Navak. PCCI is not listed among OFAC sanctioned organisations. Its shares are held on trust by the managing director of Petrochemical and Navak.

15. Mr Zangeneh’s evidence distinguishes between OFAC sourced sanctions and other international sanctions as follows: he says that he is “not aware of any International, EU or Australian sanctions that presently apply to the plaintiffs". The orders now being made giving assistance to the plaintiffs are based upon this declaration which, on the available evidence, the Court has no reason to doubt. The Court has no reason not to assist the plaintiffs.

Equitable Discovery – Order 1

16. The Court has multiple sources of power to grant the equitable discovery orders sought. The powers include: Uniform Civil Procedure Rules 2005 (“UCPR”), r 25.12 for making orders ancillary to a freezing order; Supreme Court Act 1970, s 23 for protecting the administration of justice; and, UCPR, r 1.4 for granting discovery prior to the commencement of proceedings.

17. UK authority has established, where a party has become innocently involved in the tortious acts of others and is otherwise unlikely to become a witness in proceedings, that party may be required to assist the injured parties by providing information by way of discovery and disclosure to enable the innocent victim to trace funds which have been misappropriated by a wrongdoer: Norwich Pharmacal Co. & Others v Commissioners of Customs and Excise [1974] AC 133 and Bankers Trust Co v Shapira [1980] 3 All ER 353; [1980] 1 WLR 1274. This principle has been applied and referred to with approval in Australian authority: Computer Share Ltd v Perpetual Registrar Limited (2000) 1 VR 626, (at [15]-[19]); [2000] VSC 139, and Breen v Williams (1996) 186 CLR 71 at 120; (1996) 43 ALR 481; [1996] HCA 57 (per Gummow J).

18. The principle is applicable here. The CBA, through no fault of its own, appears to have become involved in the tortious acts alleged in the Malaysian proceedings as a mere recipient of funds. The CBA is unlikely ever to be a witness in those proceedings. This is an appropriate case for the making of an order for equitable discovery in the terms of Order 1. The Court now turns to requested Orders 2 and 3, which raises different considerations, concerning the use of the material once discovered and placed in the hands of the plaintiffs.

The Harman Undertaking – Orders 2 and 3

19. The plaintiffs also sought an order releasing them from their implied undertaking (Harman v Secretary of State for the Home Department [1983] 1 AC 280); [1982] 1 All ER 532; [1982] 2 WLR 338 not to use any document or information produced in response to the order for equitable discovery for collateral purposes beyond these proceedings (referred to in these reasons as their “Harman undertaking”).

20. The plaintiffs have not suggested at any time that they wish to use the discovered documents and information for any purpose other than for deployment in the Malaysian proceedings. Ordinarily, if a party is to be released from a Harman undertaking it will be for a limited purpose, such as use in other proceedings. Here that is exactly what is proposed and the request here is limited to one other set of proceedings, the Malaysian proceedings. Order 3 as requested limits the use of the discovered documents and information to the Malaysian proceedings.

21. The Court is reluctant to make an order releasing the plaintiffs from their Harman undertaking in such blanket terms as are proposed in Order 2. The evidence in support of the application shows that the CBA is being asked to produce a dragnet of information that may capture innocent parties. Without identifying any of the persons whose names appear from this evidence, it is clear from the evidence in support of the application (including that from the CBA’s witness Mr Jyotshna Bastola who identified information to be produced) that a number of people have been involved in opening the CBA accounts through which allegedly misappropriated funds have passed; who are neither defendants in the Malaysian proceedings, nor have they been clearly identified as co-conspirators in the frauds alleged in the Malaysian proceedings.

22. Some of these people are, for example, directors of entities who have opened accounts with the CBA, through which fraudulently obtained funds passed. But they have not been named as defendants. Nor have they all been identified as possible future defendants. It is presently unclear that there is any evidence connecting them with the conspiracy alleged in the Malaysian proceedings. The available evidence is consistent with them being innocent third parties who were duped by the Malaysian conspirators into opening accounts with the CBA.

23. These third parties have confidential banking relationships with the CBA, which should and can be preserved, unless the public interest in the public conduct of the Malaysian proceedings requires otherwise. If these third parties are innocent of any involvement in the alleged Malaysian conspiracy, their reputations could suffer immense damage if their names are published as a result of the orders the Court is making today. Before this Court in Australia allows information as to their identity (and other personal information) to be disclosed to the plaintiffs for use in the Malaysian Court, the plaintiffs should be required to take steps to protect their identity from future accidental publication and to maintain the confidentiality of their personal information.

24. How is this to be done? Plainly, preventing the total use of the information and documents obtained on equitable discovery would be going too far. That outcome would deprive the Malaysian Court of access to valuable information for conducting the civil case against the named defendants in the alleged conspiracy. Equally, allowing unrestricted use of the CBA’s documents and information may cause harm to these potentially innocent third parties, once their names are publicly caught up with a notorious international fraud.

25. A balanced middle course can be fashioned, that offers reasonable protection to these third parties but still allows the documents and information to be used against the defendants in the Malaysian proceedings and the other Malaysian conspirators against whom there is evidence of wrongdoing.

26. This can be achieved by adding the following words to the proposed order: “…provided that when the documents and information are so used that the plaintiffs request any Court adjudicating the Malaysian Proceedings to make orders preventing the disclosure of the identity of and protecting the confidentiality of persons against whom there is no evidence of actual involvement in the fraudulent conduct the subject of the Malaysian proceedings”.

27. This additional proviso will permit the use of the documents and information in the Malaysian proceedings, but will require the plaintiffs to take positive steps: (1) to separate out from all the information and documents obtained through the equitable discovery order, the particular information and documents that relate to third parties against whom there is no evidence of involvement in the alleged fraudulent conspiracy; and, (2) then before that particular information is deployed in the Malaysian proceedings, to take active steps in those proceedings to protect the identity of these third parties. Such protection should be available through non-publication orders in the Malaysian proceedings. The orders made below reflect these additional terms.

28. In the meantime, the plaintiffs’ Harman undertaking will mean that the information and documents obtained through Order 1 cannot be published, deployed or used by the plaintiffs itself other than “for the purpose of the Malaysian proceedings”.

Conclusion and Orders

29. His Honour makes the following orders and directions:

1. Pursuant to rules 1.4 and 25.12 of the Uniform Civil Procedure Rules 2005, the principles in Norwich Pharmacal v Commissioners of Customs and Excise [1974] AC 133 and the principles in Bankers Trust Co v Shapira [1980] 1 WLR 1274, the Defendant, by no later than 21 days from the date of this order, make discovery to the Plaintiffs (where available) any identity document provided to the Defendant at or around the time of opening each of the accounts listed in Annexure A of the Affidavit of Jyotshna Bastola affirmed 12 February 2019, for the purpose of the Defendant confirming the identity of each account holder or signatory in relation to each account.

2. The Plaintiffs are released from the implied undertaking pursuant to the principles in Harman v Secretary of State for the Home Department [1983] 1 AC 280 not to use documents and information obtained as a result of Order 1 above for the purpose of the proceedings in Malaysia identified in paragraph 12 of the affidavit of Kamal Zangeneh affirmed on 16 January 2019 (Malaysian Proceedings), provided that when the documents and information are so used that the plaintiff requests any Court adjudicating the Malaysian Proceedings to make orders preventing the disclosure of the identity of and protecting the confidentiality of persons against whom there is no evidence of actual involvement in the fraudulent conduct the subject of the Malaysian proceedings.

3. The Court grants leave to the Plaintiffs to use the documents produced pursuant to Order 1 above for the purpose of the Malaysian Proceedings.

4. The Plaintiffs to pay the Defendant’s reasonable costs of complying with Order 1, as agreed or as assessed.

5. Liberty to apply on 3 days’ notice.

6. Adjourn these proceedings to the Registrar’s list on Thursday, 15 August 2019.

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Decision last updated: 11 July 2019