E-Trans International Finance Ltd v Kiwibank Ltd
[2015] NZHC 2394
•1 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2015-404-694 [2015] NZHC 2394
BETWEEN E-TRANS INTERNATIONAL FINANCE
LTD Plaintiff
AND
KIWIBANK LTD Defendant
Hearing: 1 October 2015 Counsel:
J A Farmer QC, H M Lim and K M Moon for Plaintiff
A S Butler and S C Keene for DefendantJudgment:
1 October 2015
(ORAL) JUDGMENT OF HEATH J
Solicitors:
Forest Harrison, Auckland Russell McVeagh, Wellington Buddle Findlay, Wellington Counsel:
J A Farmer QC, Auckland
T C Weston QC, Christchurch
E-TRANS INTERNATIONAL FINANCE LTD v KIWIBANK LTD [2015] NZHC 2394 [1 October 2015]
The proceeding
[1] This proceeding is being brought by E-Trans International Finance Ltd (E- Trans) against Kiwibank Ltd to challenge Kiwibank’s ability to cancel a contract to provide banking services to E-Trans.
[2] E-Trans carries on business as a currency exchange trader and remitter of funds to New Zealand. The problem has arisen out of the need for Kiwibank to comply with reporting requirements imposed by the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Anti-Money Laundering Act).
[3] E-Trans pleads three causes of action. It alleges that:
(a) Kiwibank has breached an implied term of its contract to supply banking services by failing to “act reasonably, fairly, consistently and ethically” in exercising powers under the banking services contract. This term is said to arise out of an obligation assumed by Kiwibank under cl 1.2 of the Code of Banking Practice. Kiwibank undertook that obligation when it joined the New Zealand Bankers’ Association. Kiwibank’s response is that it was entitled to give notice of an intention to close E-Trans’ accounts because the cost of complying with its Anti-Money Laundering Act obligations, in respect of a currency exchange trader and remitter of funds to New Zealand, was disproportionate.
(b)Because Kiwibank undertakes, as part of its business, currency exchange and remittance functions in Auckland, E-trans asserts that its decision to close its accounts has the effect of substantially lessening competition in that market, contrary to relevant provisions of the Commerce Act 1986.
(c) Kiwibank has breached its statutory duty to comply with a directive from the Reserve Bank of New Zealand, issued on 28 January 2015, by which trading banks are required to put into place reporting
mechanisms to comply with obligations under the Anti-Money Laundering Act, and are told not to do so by “blanket de-risking”, through closing affected accounts.
[4] Relief is sought in the form of an injunction to prevent Kiwibank from closing the accounts, an inquiry into damages, and a declaration that Kiwibank is in breach of its reporting obligations under s 11 of the Anti-Money Laundering Act. On
23 June 2015, an interim injunction was issued restraining Kiwibank from closing the accounts pending determination of this proceeding.1
[5] A hearing took place today to determine a number of applications in respect of which counsel had been unable to agree. They involve applications by Kiwibank for further particulars to be given in respect of the Statement of Claim, to compel E- Trans to answer interrogatories and for tailored discovery. Cross applications by E- Trans in relation to discovery and interrogatories were also debated.
[6] Following the last call on 21 September 2015, an application by E-Trans for non-party discovery against the New Zealand Bankers’ Association has been dealt with by consent. The terms of that order are set out in a joint memorandum filed on
30 September 2015, which I approved earlier today. Nothing more need be said about that.
The substantive hearing
[7] The first issue with which I need to deal concerns the timing of the hearing. At present the proceeding is set down for hearing over two weeks to commence on
16 November 2015.
[8] Mr Butler, for Kiwibank, is anxious to maintain that hearing. As he rightly says, this proceeding was issued on 1 April 2015 and, since a decision of this Court made on 23 June 2015, Kiwibank has been enjoined from closing the accounts. The interim injunction was granted in the expectation that an expedited hearing would be
possible.
1 E-Trans International Finance Ltd v Kiwbank Ltd [2015] NZHC 1417.
[9] The procedural issues ventilated at the last hearing and today, have caused me concern so far as the practicality of proceeding as early as 16 November 2015 is concerned. I fully understand Kiwibank’s strident opposition to any adjournment, but for fair trial reasons, I see little alternative.
[10] The only way in which the proceeding could be readied for hearing in November is to draw a line under the issues before further time were allowed for provision of discovery and interrogatories. My concern is that if that procedure were adopted, the possibility of a new issue arising during the course of the trial would be heightened. In that situation, an adjournment to a later date might well be ordered. I am not persuaded that the proceeding is ripe for hearing during the week starting 16
November 2015. That hearing is vacated and appearances are excused.
[11] Mr Butler submitted that an alternative would be to split the trial. That could be done, for example, by having contractual cause of action dealt with in November and the Commerce Act and breach of statutory duty causes of action at a later hearing in February 2016.
[12] I am not prepared to accede to that submission. Experience shows that attempts to divide trials in that way, while done with the best of intentions of shortening the period in which they may be determined, can often have the opposite effect; particularly in cases where appeal rights might run in respect of decisions made at the first hearing which necessarily defer consideration of others.
[13] The Court is able to accommodate a hearing of the full claim starting on 3
February 2016 and continuing until 11 February 2016 (inclusive), with some time available during the week of 22 February 2016 to conclude the hearing if necessary. Otherwise, that time would be available for judgment writing. That is a beneficial prospect so far as the likelihood of receipt of an early decision is concerned.
[14] On balance, I am satisfied that the interests of justice, particularly in a case with public interest of the type raised by the present causes of action, justify a relatively short deferral of the hearing so that all parties are ready to proceed.
[15] That said, the directions I intend to give must be complied with strictly. In the circumstances to which Mr Butler has referred, I will take a great deal of persuasion to move away from the timetable currently fixed. Counsel can work on the basis that the hearing in February 2016 is firm and that it will proceed at that time in the absence of some extraordinary and unexpected event.
Procedural directions
[16] Counsel have conferred to consider the directions necessary to ensure the proceeding is ready for hearing in February 2016. That was done following my invitation to counsel to consider alternative timetables for November 2015 and February 2016. I need not address the proposals in respect of the proposed November 2015 hearing, as they are no longer applicable.
[17] So far as interrogatories are concerned, E-Trans shall answer Kiwibank’s interrogatories by 23 October 2015. This order refers only to those interrogatories that have already been served.
[18] It is expected that interrogatories will be answered, albeit on an informal and non-sworn basis, in respect of a category of discovery over which there was dispute. That is Category 8, which involves the provision of information involving currency exchange rates, margins and commissions. On the basis that request for information is dealt with through informal interrogatory, it is unnecessary for it to be considered further in the context of discovery.
[19] I record that in relation to the Category 8 issues, Kiwibank reserves its position in relation to the admissibility of such evidence on grounds of relevance, and as to costs in the event that the information were considered irrelevant for the purpose of trial. Mr Farmer QC, for E-Trans, indicated that this information was likely to be produced as part of E-Trans’ case as a business record. Mr Butler accepted that, although the information will be provided informally, no objection would be taken (other than on grounds of relevance) to the introduction of informally supplied information as a “business record”.
[20] E-Trans and Kiwibank shall administer any further interrogatories to each other on or before 23 October 2015. Each shall answer interrogatories administered by the other on or before 6 November 2015.
[21] If required, leave is granted for E-Trans to file and serve the Further Amended Statement of Claim of 29 September 2015, which was made available today. Any particulars that Kiwibank may seek in respect of that Further Amended Statement of Claim shall be requested on or before 16 October 2015. Kiwibank shall file and serve a Statement of Defence to the further Amended Statement of Claim on or before 23 October 2015.
[22] To allow time for counsel for E-Trans to review the Statement of Defence to be filed to the latest Statement of Claim, leave to make any further amendments to the pleadings will be required after 30 October 2015, but not before.
[23] So far as factual briefs of evidence are concerned:
(a) E-Trans shall serve its briefs on or before 30 October 2015.
(b) Kiwibank shall serve its briefs on or before 18 November 2015. [24] So far as expert briefs of evidence are concerned:
(a) E-Trans shall serve expert briefs of evidence on or before 25
November 2015.
(b) Kiwibank shall serve its experts briefs of evidence on or before 11
December 2015.
[25] Counsel will arrange for the experts to confer. I leave that to counsel. In the event of any refinement to the views expressed by the experts, counsel can agree a means by which agreed evidence can be put before the Court separately to that on which there is a contest.
[26] I provide indicative dates only for the filing and service of opening submissions. I do so because it is presently unclear on what dates senior counsel for Kiwibank, Mr Weston QC, will be able to attend to such matters.
[27] Indicatively, E-Trans shall file and serve submissions no later than 14 days prior to the hearing, with Kiwibank to respond no less than seven days before the hearing. Those dates may be changed by agreement of counsel, or variation by the Court.
[28] Leave to apply for further tailored discovery is reserved. I record, for present purposes, that documents listed in Category 4 of the schedule of documents sought by E-Trans from Kiwibank are required so that E-Trans is in a position to test the accuracy of a statement said to have been made by a representative of Kiwibank that it did not have the necessary infrastructure and capacity to provide banking services to E-Trans. Counsel will address the extent of discovery required on the basis that it is the testing of the accuracy of the statement that is in issue.
[29] So far as Category 6 is concerned, an order is made by consent in these terms:
Kiwibank is required to discover extracts from all reports from or to the Reserve Bank and all internal and external audit reports relating to Kiwibank carrying out its obligations under the Anti-Money Laundering Act to the extent that they relate to money remitters and currency exchange operators since June 2013.
[30] All other aspects of discovery fall under the leave to apply category.
Appointment of Lay Member
[31] The parties have sought an order for the appointment of a Lay Member for the trial.2 I appoint Professor Martin Richardson.
[32] The Registrar is directed to confirm his appointment to him, and to forward copies of the most recent Statement of Claim, the interim injunction judgment given
by Peters J and this judgment to him, so that he may apprise himself of the issues. I
2 Commerce Act 1986, s 78.
will liaise with the Registrar concerning the provision of additional material to
Professor Richardson.
Case management
[33] So far as case management is concerned, I have informed counsel that I will be sitting out of Auckland for most of November and early December 2015.
[34] Any applications made under leave reserved, or any other issues that require judicial intervention, shall be referred to me by the Registrar. I will ensure that any such issues are dealt with on the papers, by telephone conference or by video-link, depending upon the importance of the point under consideration.
[35] Leave to apply for a hearing by telephone or video-link is reserved to both parties.
Costs
[36] All questions of costs are reserved.
[37] I thank counsel for their considerable assistance today.
P R Heath J
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