Sherwood v Commonwealth Bank of Australia
[2015] FCA 1403
•8 December 2015
FEDERAL COURT OF AUSTRALIA
Sherwood v Commonwealth Bank of Australia [2015] FCA 1403
Citation: Sherwood v Commonwealth Bank of Australia [2015] FCA 1403 Parties: LESLIE JAMES SHERWOOD, JULIANNE SHERWOOD, SEAN PATRICK JUDE MCARDLE and PAULA JOANNE MCARDLE v COMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124) and COLONIAL FIRST STATE INVESTMENTS LTD (ABN 98 002 348 352)
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 064 804 691), COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124), BANK OF QUEENSLAND LIMITED (ACN 009 656 740) and MACQUARIE BANK LIMITED (ACN 008 583 542)
File numbers: NSD 811 of 2010
QUD 577 of 2010Judge: COLLIER J Date of judgment: 8 December 2015 Catchwords: PRACTICE AND PROCEDURE – relief from implied undertakings in two separate proceedings – principles in Harman v Secretary of State for the Home Department [1983] 1 AC 280, Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 and Hearne v Street (2008) 235 CLR 125 considered – circumstances when relief should be given – Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 – re-opening closed files by filing interlocutory applications – r 2.2(1) and (2) Federal Court (Corporations) Rules 2000 (Cth)
PRACTICE AND PROCEDURE – Representative Proceedings – relief sought pursuant to s 33ZF Federal Court of Australia Act 1976 (Cth)
COSTS – s 43 Federal Court of Australia Act 1976 (Cth) – whether parties should bear their own costs
Legislation: Federal Court of Australia Act 1976 (Cth) ss 33V, 33ZF, 43, 43(1A), Pt IVA
Federal Court (Corporations) Rules 2000 (Cth) rr 2.2(1), 2.2(2)Cases cited: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
Harman v Secretary of State for the Home Department [1983] 1 AC 280
Hearne v Street (2008) 235 CLR 125
Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283
Sherwood v Commonwealth Bank of Australia (No 5) [2015] FCA 688Date of hearing: 8 December 2015 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 51 NSD 811 of 2010 Counsel for the First, Second, Third and Fourth Applicants: Mr NS Derrington Solicitor for the First, Second, Third and Fourth Applicants: Levitt Robinson Counsel for the First and Second Respondents: Mr RS Hollo SC and Mr IJM Ahmed Solicitor for the First and Second Respondents: Clayton Utz QUD 577 of 2010 Counsel for the Plaintiff: The Plaintiff did not appear Counsel for the First Defendant: The First Defendant did not appear Counsel for the Second Defendant: Mr RS Hollo SC and Mr IJM Ahmed Solicitor for the Second Defendant: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 811 of 2010
BETWEEN: LESLIE JAMES SHERWOOD
First ApplicantJULIANNE SHERWOOD
Second ApplicantSEAN PATRICK JUDE MCARDLE
Third ApplicantPAULA JOANNE MCARDLE
Fourth ApplicantAND: COMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124)
First RespondentCOLONIAL FIRST STATE INVESTMENTS LTD (ABN 98 002 348 352)
Second Respondent
JUDGE:
COLLIER J
DATE OF ORDER:
8 DECEMBER 2015
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The Commonwealth Bank of Australia and the plaintiffs in the NSW Proceedings have leave to use for the purposes of the NSW Proceedings:
(a)the documents forming part of Storm Financial Limited’s NUIX database and Phormula system produced by the Australian Securities and Investments Commission and referred to in paragraph 8 of Schedule A to the orders of 23 September 2011 in proceeding No QUD 577 of 2010; and
(b)the entirety of each document admitted into evidence as an exhibit in this proceeding during the course of the initial trial commencing on 4 March 2013.
2.Pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act) the Commonwealth Bank of Australia:
(a)re-calculate the ASIC Interest Amount and Moratorium Interest Amount for ASIC Client Code YELADA5334 as at 31 July 2015, so that the Net Interest Amount is increased by $34,556.10 to $198,629.19 for that ASIC Client Code, and then to undertake the calculations for each Settling Group Member as set out in clause 7 of the Deed of Settlement;
(b)on or before 11 December 2015, issue a revised Notification to Mr Danny Yelavich and Mrs Shirley Yelavich in accordance with the recalculation referred to in sub-paragraph 2(a) above;
(c)on or before 18 February 2016, issue letters to each Settling Group Member or Registered Settling Group Member who has returned a properly executed release by 18 December 2015 advising of the effect of the calculation in Order 2(a) above (Adjustment Letter), together with the payment of any additional amount required by that calculation in cash; and
(d)subject to sub-paragraph 2(b) above, is not required under clause 7.8 of the Deed of Settlement to re-issue Notifications to each Settling Group Member or Registered Settling Group Member.
3.Pursuant to s 33ZF of the Act, notwithstanding the matters set out in Order 2 above, any releases provided by Settling Group Members in relation to Notifications issued by the Commonwealth Bank of Australia as at the date of this Order and as may be subsequently provided take effect in accordance with their terms.
4.Each party pay their own costs of and incidental to the interlocutory applications filed 30 November 2015 and 1 December 2015.
In this Order:
ASIC Client Code has the meaning given to that term in the Deed of Settlement in clause 1.1
Deed of Settlement means the Deed of Settlement executed on 27 February 2015 which is confidential Exhibit SC-A to the affidavit of Stephanie Carmichael sworn 27 February 2015.
NSW Proceedings means the following proceedings in the Supreme Court of New South Wales:
(a) A Ahern v Commonwealth Bank of Australia (2014/00363471)
(b) L Ahern v Commonwealth Bank of Australia (2014/00363552)
(c) Angelino v Commonwealth Bank of Australia (2014/00363441)
(d) Benson v Commonwealth Bank of Australia (2014/00363340)
(e) Dorward v Commonwealth Bank of Australia (2014/00363607)
(f) D Emmanuel v Commonwealth Bank of Australia (2014/00363625)
(g) V Emmanuel v Commonwealth Bank of Australia (2014/00363616)
(h) Garde v Commonwealth Bank of Australia (2014/00363411)(i) Hudson v Commonwealth Bank of Australia (2014/00363574)
(j) Kybus v Commonwealth Bank of Australia (2014/00363464)
(k) Macan v Commonwealth Bank of Australia (2014/00363628)
(l) McDonald v Commonwealth Bank of Australia (2014/00363646)
(m) O’Brien v Commonwealth Bank of Australia (2014/00363217)
(n) Revill v Commonwealth Bank of Australia (2014/00363313)
(o) Thumm v Commonwealth Bank of Australia (2014/00363304)
(p) Vlahos v Commonwealth Bank of Australia (2014/00363292)
(q) Vogel v Commonwealth Bank of Australia (2014/00363591)
(r) Wardle v Commonwealth Bank of Australia (2014/00363562)
(s) West v Commonwealth Bank of Australia (2014/00363649)
Registered Settling Group Member has the meaning given to that term in the Deed of Settlement executed by the parties to this proceeding in February 2015.
Settling Group Member has the meaning given to that term in the Deed of Settlement, and includes any Associated Entity.Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 577 of 2010
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PlaintiffAND: STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 064 804 691
First DefendantCOMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second DefendantBANK OF QUEENSLAND LIMITED ACN 009 656 740
Third DefendantMACQUARIE BANK LIMITED ACN 008 583 542
Fourth Defendant
JUDGE:
COLLIER J
DATE OF ORDER:
8 DECEMBER 2015
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The Commonwealth Bank of Australia and the plaintiffs in the NSW Proceedings have leave to use for the purposes of the NSW Proceedings:
(a)the documents forming part of Storm Financial Limited’s NUIX database and Phormula system produced by the Australian Securities and Investments Commission and referred to in paragraph 8 of Schedule A to the orders of 23 September 2011 in these proceedings; and
(b)the entirety of each document admitted into evidence as an exhibit in proceeding No NSD 811 of 2010 during the course of the initial trial commencing on 4 March 2013.
2.Each party pay their own costs of and incidental to the interlocutory application filed 2 December 2015.
In this Order:
NSW Proceedings means the following proceedings in the Supreme Court of New South Wales:
(a) A Ahern v Commonwealth Bank of Australia (2014/00363471)
(b) L Ahern v Commonwealth Bank of Australia (2014/00363552)
(c) Angelino v Commonwealth Bank of Australia (2014/00363441)
(d) Benson v Commonwealth Bank of Australia (2014/00363340)
(e) Dorward v Commonwealth Bank of Australia (2014/00363607)
(f) D Emmanuel v Commonwealth Bank of Australia (2014/00363625)
(g) V Emmanuel v Commonwealth Bank of Australia (2014/00363616)
(h) Garde v Commonwealth Bank of Australia (2014/00363411)(i) Hudson v Commonwealth Bank of Australia (2014/00363574)
(j) Kybus v Commonwealth Bank of Australia (2014/00363464)
(k) Macan v Commonwealth Bank of Australia (2014/00363628)
(l) McDonald v Commonwealth Bank of Australia (2014/00363646)
(m) O’Brien v Commonwealth Bank of Australia (2014/00363217)
(n) Revill v Commonwealth Bank of Australia (2014/00363313)
(o) Thumm v Commonwealth Bank of Australia (2014/00363304)
(p) Vlahos v Commonwealth Bank of Australia (2014/00363292)
(q) Vogel v Commonwealth Bank of Australia (2014/00363591)
(r) Wardle v Commonwealth Bank of Australia (2014/00363562)
(s) West v Commonwealth Bank of Australia (2014/00363649)Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 811 of 2010
BETWEEN: LESLIE JAMES SHERWOOD
First ApplicantJULIANNE SHERWOOD
Second ApplicantSEAN PATRICK JUDE MCARDLE
Third ApplicantPAULA JOANNE MCARDLE
Fourth ApplicantAND: COMONWEALTH BANK OF AUSTRALIA (ABN 48 123 123 124)
First RespondentCOLONIAL FIRST STATE INVESTMENTS LTD (ABN 98 002 348 352)
Second Respondent
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 577 of 2010
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PlaintiffAND: STORM FINANCIAL LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 064 804 691
First DefendantCOMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second DefendantBANK OF QUEENSLAND LIMITED ACN 009 656 740
Third DefendantMACQUARIE BANK LIMITED ACN 008 583 542
Fourth Defendant
JUDGE:
COLLIER J
DATE:
8 DECEMBER 2015
PLACE:
BRISBANE
REASONS FOR JUDGMENT
On 7 July 2015 in Sherwood v Commonwealth Bank of Australia (No 5) [2015] FCA 688 I ordered, inter alia, that pursuant to s 33V and s 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act) settlement of the proceeding be approved on the terms set out in a confidential Deed of Settlement executed on 27 February 2015. Numerous auxiliary orders were also made, including that pursuant to s 33ZF of the Act, all things required to give effect to the approved settlement must be completed within six months of the approval date. This proceeding was conducted in the Federal Court of Australia under the file number NSD 811 of 2010.
QUD 577 of 2010 Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (in liquidation) (ACN 064 804 691) was a separate matter on the docket of Reeves J. These proceedings were finalised in March 2015 when final orders dismissing the proceedings against outstanding respondents were made by his Honour.
On 30 November 2015 and 1 December 2015 two interlocutory applications were filed by the Commonwealth Bank of Australia (CBA) and Colonial First State Investments Ltd (CFS), both of whom were respondents in NSD 811 of 2010.
On 2 December 2015 a third interlocutory application was filed by CBA, which was also a respondent in QUD 577 of 2010.
The relevant Federal Court files in respect of these matters were, until very recently, closed. The filing of these interlocutory applications currently before me has had the effect of re-opening those files: r 2.2(1) and (2) Federal Court (Corporations) Rules 2000 (Cth).
In the first interlocutory application (first interlocutory application), which was filed in NSD 811 of 2010 on 30 November 2015, CBA and CFS seek the following orders:
1.The Commonwealth Bank of Australia and the plaintiffs in the NSW Proceedings have leave to use for the purposes of the NSW Proceedings:
a.The documents forming part of Storm Financial Limited’s NUIX database and Phormula system produced by the Australian Securities and Investments Commission and referred to in paragraph 8 of Schedule A to the orders of 23 September 2011 in proceeding No. QUD 577 of 2010; and
b.The entirety of each document admitted into evidence as an exhibit in this proceeding during the course of the initial trial commencing on 4 March 2012.
2. Such further or other order as the Court deems fit.
3. Each party pay their own costs.
In these orders, NSW Proceedings means the following proceedings in the Supreme Court of New South Wales:
(a) A. Ahern v Commonwealth Bank of Australia (2014/00363471)
(b) L. Ahern v Commonwealth Bank of Australia (2014/00363552)
(c) Angelino v Commonwealth Bank of Australia (2014/00363441)
(d) Benson v Commonwealth Bank of Australia (2014/00363340)
(e) Dorward v Commonwealth Bank of Australia (2014/00363607)
(f) D. Emmanuel v Commonwealth Bank of Australia (2014/00363625)
(g) V. Emmanuel v Commonwealth Bank of Australia (2014/00363616)
(h) Garde v Commonwealth Bank of Australia (2014/00363411)(i) Hudson v Commonwealth Bank of Australia (2014/00363574)
(j) Kybus v Commonwealth Bank of Australia (2014/00363464)
(k) Macan v Commonwealth Bank of Australia (2014/00363628)
(l) McDonald v Commonwealth Bank of Australia (2014/00363646)
(m) O’Brien v Commonwealth Bank of Australia (2014/00363217)
(n) Revill v Commonwealth Bank of Australia (2014/00363313)
(o) Thumm v Commonwealth Bank of Australia (2014/00363304)
(p) Vlahos v Commonwealth Bank of Australia (2014/00363292)
(q) Vogel v Commonwealth Bank of Australia (2014/00363591)
(r) Wardle v Commonwealth Bank of Australia (2014/00363562)
(s) West v Commonwealth Bank of Australia (2014/00363649)(In relation to this interlocutory application, I note what appears to be a typographical error in in paragraph 1(b). It is a matter of record that the initial trial in NSD 811 of 2010 commenced on 4 March 2013, not 4 March 2012. This error was corrected by Mr Hollo appearing for CBA and CFS at the hearing of this matter today.)
In the second interlocutory application (second interlocutory application), which was filed in NSD 811 of 2010 on 1 December 2015, CBA and CFS seek the following orders:
1.Pursuant to s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FC Act) the First Respondent:
a.Re-calculate the ASIC Interest Amount and Moratorium Interest Amount for ASIC Client Code YELADA5334 as at 31 July 2015, so that the Net Interest Amount is increased by $34,556.10 to $198,629.19 for that ASIC Client Code, and then to undertake the calculations for each Settling Group Member as set out in clause 7 of the Deed of Settlement;
b.On or before 11 December 2015, issue a revised Notification to Mr Danny Yelavich and Mrs Shirley Yelavich in accordance with the recalculation referred to in sub-paragraph 1 (a) above;
c.On or before 18 February 2016, issue letters to each Settling Group Member or Registered Settling Group Member who has returned a properly executed release by 18 December 2015 advising of the effect of the calculation in Order 1 (a) above (Adjustment Letter), together with the payment of any additional amount required by that calculation in cash; and
d.Subject to sub-paragraph 1 (b) above, is not required under clause 7.8 of the Deed of Settlement to re-issue Notifications to each Settling Group Member or Registered Settling Group Member.
2.Pursuant to s 33ZF of the FC Act, notwithstanding the matters set out in order 1 above, any releases provided by Settling Group Members in relation to Notifications issued by the First Respondent as at the date of this Order and as may be subsequently provided take effect in accordance with their terms.
3. Such further or other order as the Court deems fit.
4. Each party pay their own costs.
Definitions
In this Interlocutory Application:
ASIC Client Code has the meaning given to that term in the Deed of Settlement in clause 1.1
Deed of Settlement means the Deed of Settlement executed on 27 February 2015 which is confidential Exhibit SC-A to the affidavit of Stephanie Carmichael sworn 27 February 2015.
Registered Settling Group Member has the meaning given to that term in the Deed of Settlement executed by the parties to this proceeding in February 2015.
Settling Group Member has the meaning given to that term in the Deed of Settlement, and includes any Associated Entity.In the third interlocutory application (third interlocutory application), which was filed in QUD 577 of 2010 on 2 December 2015, CBA seeks the following orders:
1.The Commonwealth Bank of Australia and the plaintiffs in the NSW Proceedings have leave to use for the purposes of the NSW Proceedings:
a.The documents forming part of Storm Financial Limited’s NUIX database and Phormula system produced by the Australian Securities and Investments Commission and referred to in paragraph 8 of Schedule A to the orders of 23 September 2011 in these proceedings; and
b.The entirety of each document admitted into evidence as an exhibit in proceeding No. NSD 811 of 2010 during the course of the initial trial commencing on 4 March 2013.
2. Such further or other order as the Court deems fit.
3. Each party pay their own costs.
In these orders, NSW Proceedings means the following proceedings in the Supreme Court of New South Wales:
(a) A. Ahern v Commonwealth Bank of Australia (2014/00363471)
(b) L. Ahern v Commonwealth Bank of Australia (2014/00363552)
(c) Angelino v Commonwealth Bank of Australia (2014/00363441)
(d) Benson v Commonwealth Bank of Australia (2014/00363340)
(e) Dorward v Commonwealth Bank of Australia (2014/00363607)
(f) D. Emmanuel v Commonwealth Bank of Australia (2014/00363625)
(g) V. Emmanuel v Commonwealth Bank of Australia (2014/00363616)
(h) Garde v Commonwealth Bank of Australia (2014/00363411)(i) Hudson v Commonwealth Bank of Australia (2014/00363574)
(j) Kybus v Commonwealth Bank of Australia (2014/00363464)
(k) Macan v Commonwealth Bank of Australia (2014/00363628)
(l) McDonald v Commonwealth Bank of Australia (2014/00363646)
(m) O’Brien v Commonwealth Bank of Australia (2014/00363217)
(n) Revill v Commonwealth Bank of Australia (2014/00363313)
(o) Thumm v Commonwealth Bank of Australia (2014/00363304)
(p) Vlahos v Commonwealth Bank of Australia (2014/00363292)
(q) Vogel v Commonwealth Bank of Australia (2014/00363591)
(r) Wardle v Commonwealth Bank of Australia (2014/00363562)
(s) West v Commonwealth Bank of Australia (2014/00363649)
In the circumstances it is convenient to deal with the first and third interlocutory applications together, before turning to the second interlocutory application.
FIRST AND THIRD INTERLOCUTORY APPLICATIONS
While the parties are different, the orders sought in the first and third interlocutory applications are very similar in that they both seek so-called “Harman relief” referable to implied undertakings concerning documents in both sets of proceedings. The same firm of solicitors, Sydney lawyers Levitt Robinson Solicitors, acts for both the plaintiffs in the NSW proceedings referred to in the interlocutory applications and the applicants in NSD 811 of 2010. In a communication to the Court yesterday, those solicitors confirmed that:
·the plaintiffs in the NSW proceedings support the two interlocutory applications currently before the Court in NSD 811 of 2010 and would make no additional submissions;
·the applicants in NSD 811 of 2010 have no objection to the grant of the relief sought in the first interlocutory application; and
·in relation to the second interlocutory application in NSD 811 of 2010, the applicants would make additional submissions.
There was no appearance in Court today by the applicants in respect of the first and third interlocutory applications.
CBA and CFS also submit, in summary:
·The Australian Securities and Investments Commission (ASIC) and the liquidator of Storm Financial Limited (Receivers and Managers Appointed) (in liquidation) (Storm) are the entities which may have an interest in the documents the subject of these interlocutory applications.
·The interest of ASIC arises by reason of the fact that it produced the relevant documents in both NSD 811 of 2010 and QUD 577 of 2010.
·The interest of the liquidator of Storm has an interest in the documents because the documents produced were ultimately obtained from, and belonged to, Storm;
·Both ASIC and the liquidator of Storm have been informed of the intention of CBA and CFS to make the interlocutory applications, and have not notified CBA or CFS of any objection.
·Notice of the interlocutory applications was also given to Emmanuel and Julie Cassimatis, who were Joint Chief Executives of Storm.
I also note that in his affidavit sworn 30 November 2015, Mr Gregory Williams, the solicitor for CBA and CFS, deposed:
71.On 27 November 2015 I sent a letter to ASIC informing it of CBA’s intention to make the Interlocutory Application and asking it to identify whether it had any objection to the orders sought in that application. As at the date of this affidavit, I have not received a reply to that letter.
72.On 27 November 2015 I sent a letter to the liquidator for Storm, Mr Raj Khatri of Worrells, informing him of CBA’s intention to make the Interlocutory Application and asking him to identify whether he had any objection to the orders sought in that application. As at the date of this affidavit, I have not received a reply to that letter.
Mr Williams swore a subsequent affidavit on 7 December 2015 in which he deposed as follows:
5.On 1 December 2015, Clayton Utz sent an email to Ms Stowell of the Australian Securities and Investments Commission (ASIC) and Mr Raj Khatri of Worrells, Liquidator for Storm Financial Limited (Storm), serving a copy of the Interlocutory Application and 30 November Affidavit. The exhibit to the 30 November Affidavit, marked “GJW-1”, was also served on 1 December 2015 on both parties.
6.On 2 December 2015, Clayton Utz sent an email to Ms Stowell and Mr Khatri informing that the Interlocutory application had been listed before the Honourable Justice Collier on 8 December 2015 at 11.00am (Brisbane local time).
7.On 3 December 2015, Ms Stowell sent an email to Clayton Utz in relation to the Interlocutory Application. The email attached an affidavit of Yon Astar, senior solicitor at ASIC, sworn 20 December 2011 with respect to an interlocutory application made in in Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed)(In Liquidation) ACN 064 804 691 - Federal Court Proceedings No. QUD577/2010. That interlocutory application concerned, amongst other things, access to the NUIX database and Phormula system, which are described at paragraphs 22 and 23 of my 30 November Affidavit. A copy of that affidavit is at pages 1 to 2 of “GJW-2”.
8.On 3 December 2015, Clayton Utz sent an email to Ms Stowell, responding to ASIC’s email dated 3 December 2015 and informing ASIC that Clayton Utz would shortly be informing Russells, in their capacity as solicitors for Mrs Julie and Mr Emmanuel Cassimatis, of the Interlocutory Application. A copy of that email is at pages 3 to 5 of “GJW-2”.
9.On 3 December 2015, Clayton Utz wrote to Russells in relation to the Interlocutory Application and listing before the Hon. Justice Collier. A copy of that letter is at pages 6 to 8 of “GJW-2”. Mr Stephen Russell, Managing Partner of Russells, responded to Clayton Utz’ letter of 3 December 2015. A copy of that email is at pages 9 to 10 of “GJW-2”.
10.On 4 December 2015, Mr Khatri of Worrells wrote to Clayton Utz responding to the 27 November 2015 letter. Mr Khatri informed Clayton Utz that Worrells did not intend to appear in relation to the Interlocutory Application, unless required by the Court. A copy of that letter is at page 11 of “GJW-2”.
11.On 7 December 2015, I had a telephone conversation with Mr Scott Sharry, Partner of Clayton Utz (Brisbane office) and solicitor for KordaMentha in their capacity as receivers of Storm. Mr Sharry had received instructions from KordaMentha that they would not be opposing the Interlocutory Application and did not require formal notification of it.
Factual background
The factual background to the first and third interlocutory applications is set out in an affidavit of Mr Williams sworn 30 November 2015.
In summary, Mr Williams deposes:
·The proceeding in NSD 811 of 2010 was a representative proceeding conducted pursuant to Part IVA of the Act. Both that proceeding and the proceeding in QUD 577 of 2010 were commenced in 2010. They were also case managed together from April 2011 by Reeves J in the Federal Court.
·The Court made discovery orders in both proceedings on 23 September 2011, requiring ASIC to produce to CBA and other parties Storm’s NUIX Database and Phormula system.
·The NUIX Database is an electronic database which contains the business records of Storm, including documents such as statements of advice provided by Storm to its clients, risk profile assessments for Storm clients, and cashflow analyses.
·The Phormula system was Storm’s proprietary customer management system. It contains a record of interactions between Storm and its customers, and also allowed Storm advisers to monitor and manage their clients’ margin and investment positions.
·ASIC produced the NUIX Database and the Phormula system to the lawyers for CBA, in accordance with the Court’s orders. The NUIX Database and the Phormula system were loaded on to computers maintained by the CBA lawyers. This information is currently inaccessible to the CBA lawyers, however if the orders sought are granted it can be made available within a period of approximately three weeks.
·In Sherwood v Commonwealth Bank of Australia (No 5) [2015] FCA 688 the orders of the Court included a definition of “group member” so that certain persons referred to as “Nil Offerees” and “Excluded Persons” did not participate in that settlement. Those persons retained their existing rights to commence proceedings against CBA.
·In December 2014 a number of Nil Offerees, Excluded Persons and other persons commenced proceedings against CBA in the Supreme Court of New South Wales. Those claims substantially replicate the majority of the claims made in NSD 811 of 2010, but also involve new claims.
·All of the claims in the Supreme Court of New South Wales involving Nil Offerees and Excluded Persons relate to the operation of Storm, advice that the plaintiffs in the New South Wales proceedings received from Storm, and/or investments that the plaintiffs in those proceedings allege they made in accordance with advice given by Storm.
“Harman” relief - general principles
As I noted earlier in this judgment, the relief sought in these interlocutory applications is sometimes called “Harman relief” by reference to the decision in Harman v Secretary of State for the Home Department [1983] 1 AC 280. In that case the House of Lords held that, as a general proposition, an order for the production of documents to a solicitor on behalf of a party to civil litigation is made upon the implied undertaking given by the solicitor personally to the Court that he or she will not use or allow the documents or copies of them to be used for any collateral or ulterior purpose of his or her own, the client, or anyone else, and that any breach of that implied undertaking is a contempt of court by the solicitor. Save as concerns the gravity of the contempt, no distinction is to be drawn between those documents which have and those which have not been admitted in evidence (per Lord Diplock at 304).
The principles explained in Harman have been adopted in Australian law. In particular, the High Court has recognised that the true basis of the implied undertaking lies in the fact that documents in proceedings, whether produced on discovery, subpoena or under any other order of the court, are produced under compulsion: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32-33 and Hearne v Street (2008) 235 CLR 125 at [96], [110]. As was explained in Hearne:
·While traditionally viewed as an undertaking, in reality the party is subject to a legal obligation which arises by operation of law by virtue of the circumstances under which the relevant person obtained the documents or information (at [107]-[108]).
·The primary person bound by the relevant obligation is the litigant who receives documents or information from the other side pursuant to litigious processes (at [109]). The litigant is bound not to use affidavits or witness statements served by another party on it otherwise than for the purpose of the proceedings in which they were prepared (at [61], [96]).
Release from this obligation is only available in “special circumstances”. As the Full Court of this Court said in Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 at 290:
[31]In order to be released from the implied undertaking it has been said that a party in the position of the appellants must show “special circumstances”: see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 ; 110 ALR 685. It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. The notion of “special circumstances” does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees, Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. These were:
Ÿ the nature of the document;
Ÿ the circumstances under which the document came into existence;
Ÿ the attitude of the author of the document and any prejudice the author may sustain;
Ÿ whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain;
Ÿ the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information);
Ÿ the circumstances in which the document came in to the hands of the applicant; and
Ÿ most importantly of all, the likely contribution of the document to achieving justice in the other proceeding.
Consideration
In summary, CBA and CFS submit that it is appropriate for the Court to grant the relief sought, and thus permit the use of the documents listed in the first and third interlocutory applications in proceedings in the Supreme Court of New South Wales, for the following reasons:
·The relevant documents are also relevant to matters in issue in the New South Wales proceedings, and will assist in the just resolution of the matters in dispute in those proceedings.
·The New South Wales proceedings have substantially arisen out of the settlement in NSD 811 of 2010. The terms of that settlement reserved the entitlement of the plaintiffs in the New South Wales proceedings to prosecute their claims against CBA and CFS elsewhere (which those plaintiffs have, clearly, proceeded to do).
·At the time the relevant documents were produced a majority of the plaintiffs in the New South Wales proceedings were group members in NSD 811 of 2010.
·The use of the documents to assist in the resolution of the claims of former group members, albeit in the New South Wales proceedings, is a use of the documents which is of the very same kind contemplated in NSD 811 of 2010.
·The ability to use the relevant documents for the purposes of the New South Wales proceedings could work no unfairness in circumstances where those documents would have been used in resolving the claims of group members as part of NSD 811 of 2010 had that proceeding not settled.
·In the absence of the orders sought in the interlocutory applications, there may not be an alternative means by which access to the relevant documents can be obtained. This is because:
omatters the subject of the proceedings occurred nearly 7 years ago;
oas many of those involved are individuals, many of the relevant documents may not have been kept or may not be readily accessed;
orelevant documents include internal Storm deliberations which will be relevant to matters including how Storm formulated its advice and how it managed the affairs of clients;
othe only place such documents would have been kept is in the NUIX Database or Phormula System.
·The orders set out in the interlocutory applications provide the most efficient means by which the matters in issue in the New South Wales proceedings can be resolved, particularly in light of the volume of material and the work required to put the documents in a format which could be readily accessed (in the order of several months’ work and a cost of $35,000).
·Neither ASIC nor the liquidator of Storm has raised an objection to the orders sought in the interlocutory applications.
·At certain points in the trial in NSD 811 of 2010 only parts of particular documents were tendered as evidence. In order for documents tendered in NSD 811 of 2010 to be capable of being understood in the New South Wales proceeding and used in the context of the claims made by the plaintiffs in that case, it is necessary for the parties to have leave to use the whole of the tendered documents rather than merely extracts from them.
As I have already noted, the only submissions received by the Court in relation to the first and third interlocutory applications were provided by the legal representatives of CBA and CFS, and the applicants in NSD 811 of 2010. The submissions of the applicants in NSD 811 of 2010 were, in summary, that they did not oppose the grant of relief in respect of the first or third interlocutory applications.
I am satisfied from the material before me that ASIC, Storm, and Mr and Mrs Cassimatis were all informed of the interlocutory applications and the hearing today, and that they have chosen not to participate.
In my view the submissions of CBA and CFS in respect of the first and third interlocutory applications are compelling. I am prepared to grant the relief sought.
SECOND INTERLOCUTORY APPLICATION
The second interlocutory application in NSD 811 of 2010 raises matters of substance in respect of the agreed settlement of that matter. Importantly, the applicants in NSD 811 of 2010 do not object to orders being made in terms of the relief sought at paragraphs 1-3 of this interlocutory application, however they do oppose the relief sought in paragraph 4, namely that each party pay their own costs.
Factual background to relief sought in paragraphs 1-3
In respect of this interlocutory application CBA relies on two additional affidavits of Mr Williams, sworn 1 December 2015 and 8 December 2015. Relevant facts are as follows.
The parties reached an in-principle settlement of the proceeding in NSD 811 of 2010 in November 2014. The parties entered a deed of settlement in February 2015 (the deed), and on 7 July 2015 in Sherwood v Commonwealth Bank of Australia (No 5) [2015] FCA 688 the Court approved the settlement of the proceeding on the terms set out in that deed.
Clauses 1.1 and 7 of the deed specify that the amount which CBA is required to pay to each Settling Group Member pursuant to the settlement be calculated subject to any “Moratorium Interest Amount”. This meant that the amount that had accrued on that group member’s outstanding loans to CBA be set-off against the interest calculated under the ASIC Compensation Model.
The Moratorium Interest Amount related to a voluntary step taken by CBA to freeze repayments and the debiting of interest of loans made to some CBA customers in relation to Storm. Under the Moratorium, interest amounts continued to accrue in respect of a loan, but those amounts were not debited to the loan account and no repayments were required during the operation of the Moratorium in respect of the loan.
Two Settling Group Members in this proceeding were Mr and Mrs Yelavich. They held an investment loan from CBA to which the Moratorium applied. In September 2011 Mr and Mrs Yelavich informed CBA that they intended to refinance their loan and requested a payout figure. On 14 September 2011 an amount of $33,689.43 was debited to the Yelavich Home Loan. This was the amount calculated as the interest which had accrued on the Yelavich Home Loan during the Moratorium but which had not been debited to their loan.
On 27 September 2011 the Yelavich Home Loan was repaid in full, and the loan was closed on or about 4 October 2011.
On 16 October 2015, CBA issued a Notification under the settlement to Mr and Mrs Yelavich, setting out the following details:
(a) A Settlement Sum of $531,854.14;
(b) A Total CBA Moratorium Amount of $34,556.10; and
(c) A Remainder (to be paid in cash) of $531,854.14.
The inclusion of a Moratorium Interest Amount in that notification was later identified as an error because Mr and Mrs Yelavich had already paid that interest amount when refinancing their loan. This error had the following effects:
·the amount payable to Mr and Mrs Yelavich in the settlement of the proceedings was understated by reason of the assumption of the (incorrect) Moratorium Interest Amount;
·the amount payable to 115 ASIC Client Codes was understated by an amount expected to be less than $100; and
·the amount payable to 25 ASIC Client Codes was understated by an amount expected to be between $100 and $800.
At [17] of his affidavit sworn 1 December 2015, Mr Williams deposed that, to remedy this situation, CBA proposes to:
·re-calculate the ASIC Interest Amount and Moratorium Interest Amount for ASIC Client Code YELADA5334 as at 31 July 2015, so that the Net Interest Amount is increased by $34,556.10 to $198,629.19 for that ASIC Client Code;
·use the resulting re-calculated ASIC Compensation Amount for Mr and Mrs Yelavich to re-perform the calculations for each Settling Group Member, including for ASIC Client Code YELADA5334 in accordance with the terms of the deed;
·on or before 11 December 2015, issue a revised Notification to Mr and Mrs Yelavich in accordance with that recalculation; and
·on or before 18 February 2016, issue letters to each Settling Group Member or Registered Settling Group Member (if any) who has returned a properly executed release by 18 December 2015 advising of the effect of the recalculations, together with the payment of any additional amount required by that calculation in cash.
Mr Williams further deposes that:
·In substance, CBA seeks an order to the effect that it not be required to re-issue Notifications within the meaning of clause 7 of the deed to each Settling Group Member, and not be required to seek further releases from Settling Group Members.
·He is concerned that if CBA were required to reissue Notifications, and Settling Group Members were required to execute and return further Releases, such actions would be likely to cause unnecessary confusion and expense to Settling Group Members. This is particularly so when the effect of the adjustments is to increase the amounts payable by CBA to Settling Group Members, and no Settling Group Member is worse off.
·The approach outlined seeks to address a lacuna in the deed, whereby there is no specified mechanism for addressing errors in the integers used to calculate the various settlement sums.
Consideration
CBA submits that the orders sought in the second interlocutory application seek to give effect to the intention of the settlement between the parties, and to ensure that this proceeding can be disposed of with appropriate efficiency. In particular:
·The orders sought do not prejudice any party, but rather operate in accordance with the terms of the settlement reached between the parties and leave no group member worse off.
·In circumstances where they are yet to return a release, a new Notification under the deed will be issued to Mr and Mrs Yelavich setting out the recalculation of the amounts to be paid to them.
·Each Settling Group Member to whom an additional payment will be made will be provided with notice of their additional payment. In the majority of cases the additional payment will be less than $100. In those circumstances it is not appropriate that a new Notification under the deed be issued to those Settling Group Members, because the additional cost and effort required would be disproportionate to the amount actually payable.
·It is appropriate that releases that have been, and will be, provided to CBA by Settling Group Members should take effect in accordance with their terms. To require CBA to undertake a process of re-issuing releases to Settling Group Members would involve significant cost and effort to all parties, and potentially confuse Settling Group Members. This is particularly so in light of the relatively small amounts payable.
·No party has raised any objection to the orders sought in the interlocutory application.
The Court has also received submissions from the solicitors for the applicants in NSD 811 of 2010, Levitt Robinson Solicitors. The applicants rely on an affidavit of Ms Stephanie Carmichael, solicitor with Levitt Robinson Solicitors, sworn 7 December 2015.
The applicants do not oppose the orders sought in paragraphs 1-3 of the second interlocutory application.
Section 33ZF of the Act confers broad powers on the Court to make orders in respect of proceedings under Part IVA of the Act. Specifically it provides:
General power of Court to make orders
(1)In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
In my view the orders sought cause no prejudice to any party, and more particularly address a problem which has arisen in the implementation of the settlement deed. In light of the evidence before the Court and the submissions of the parties, I consider that it is appropriate, and in the interests of justice, to make the orders sought.
Paragraph 4: Costs
In respect of the second interlocutory application CBA and CFS seek an order that all parties bear their own costs. The applicants submitted that their costs should be borne by CBA.
CBA and CFS relied on the two additional affidavits of Mr Williams sworn 1 December 2015 and 8 December 2015, and the applicants relied on Mrs Carmichael’s affidavit.
In her affidavit, Ms Carmichael estimates that Levitt Robinson will incur costs and disbursements of approximately $3,146 in responding to the second interlocutory application.
In summary, CBA and CFS submitted that parties should bear their own costs because:
·While an error may have been made by CBA in relation to calculation of amounts payable to Mr and Mrs Yelavich, that error had not been corrected by the solicitors for the applicants, which included Mr and Mrs Yelavich, prior to the execution of the deed which replicated the error.
·Clause 5.3 of the deed provides that the parties will bear their own costs of and in relation to the deed.
·On the material before the Court the only work undertaken by the solicitors for the applicants in relation to this interlocutory application was in respect of their prosecution of a special costs order.
·The solicitors for the applicants had received ample compensation in excess of $10 million for their legal services including disbursements in relation to this proceeding.
The applicants submitted that their costs should be borne by CBA and CFS because, in summary:
·Order 3 of the orders in Sherwood v Commonwealth Bank of Australia (No 5) [2015] FCA 688 approved the applicants’ costs of the proceedings, which were paid from the aggregate compensation amount.
·The applicants’ legal costs have not been funded during the administration of the settlement including in relation to the second interlocutory application. As evidenced in the affidavit of Ms Carmichael, total costs of the applicants since the settlement was approved have been in the order of $132,000.
·The second interlocutory application was necessitated because of an error by the respondents in calculating the entitlements of Mr and Mrs Yelavich.
·The applicants have been required to incur costs in meeting the second interlocutory application.
·The interlocutory application affects a significant number of group members, and therefore requires the attention of the applicants’ legal representatives.
·It is not reasonable or fair that the applicants or the applicants’ legal representatives should bear the fees of appearing at the application where, as deposed by Ms Carmichael, there is no reasonable prospect that they will be recovered from settling group members.
·The primary responsibility of the administration of the settlement lay with CBA.
·Levitt Robinson Solicitors identified the error in calculation of payments to Mr and Mrs Yelavich, and incurred costs in so doing.
·The amount of legal fees previously recovered by Levitt Robinson Solicitors in the course of the proceedings is irrelevant.
Relevantly, s 43 of the Act provides that:
(1)The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs must not be awarded. This is subject to:
(a) subsection (1A); and
(b) section 570 of the Fair Work Act 2009; and
(c) section 18 of the Public Interest Disclosure Act 2013.(1A)In a representative proceeding commenced under Part IVA or a proceeding of a representative character commenced under any other Act that authorises the commencement of a proceeding of that character, the Court or Judge may not award costs against a person on whose behalf the proceeding has been commenced (other than a party to the proceeding who is representing such a person) except as authorised by:
(a)in the case of a representative proceeding commenced under Part IVA--section 33Q or 33R; or
(b)in the case of a proceeding of a representative character commenced under another Act--any provision in that Act.
(2)Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.
In this case there is no application for an award of costs against any person as contemplated by s 43(1A). It follows that the award of costs in this case is a matter in the Court’s discretion.
In my view the parties to this interlocutory application should bear their own costs.
I accept the submission of Mr Hollo that while there may have been an error on the part of CBA in calculating the proper payment to Mr and Mrs Yelavich, this error was at no time identified by the legal representatives of Mr and Mrs Yelavich, who also had responsibility to ensure that the amounts payable were correct. No real explanation for this oversight on the part of the legal representatives of the applicants has been provided. Certainly there is no evidence before the Court that forensic material was only belatedly provided which may have assisted Levitt Robinson to identify the error in the calculations. Both parties appear to be at fault, and it is proper that each party bear their own costs to remedy this error.
This is particularly so when the terms of the deed contemplate each party bearing its own costs “of and in relation to the deed”. In my view it is clear that this interlocutory application, and the orders sought, are “in relation to the deed” within the meaning of clause 5.3 of the deed.
It may be that Levitt Robinson has recouped significant legal fees in these proceedings. It is equally possible that the legal representatives of CBA and CFS have been similarly remunerated. I do not consider this a relevant issue for the purposes of this interlocutory application. I also note the submission of Mr Derrington for the applicants that Levitt Robinson performed work referable to the identification of the error. On the material before me I am not satisfied that any such work could - or should - properly be attributed to the appearance by Levitt Robinson in relation to the second interlocutory application today.
I note Ms Carmichael’s evidence that Levitt Robinson will be unable to recoup its legal fees in relation to this interlocutory application. No reason for this inability has been advanced. In the circumstances I do not consider it a reason to burden CBA and CFS with any such legal fees incurred by Levitt Robinson.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate:
Dated: 8 December 2015
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