FEDERAL COURT OF AUSTRALIA

Beluga Shipping GmbH & Co v Suzlon Energy Ltd (No 5)[2011] FCA 176

FEDERAL COURT OF AUSTRALIA

Beluga Shipping GmbH & Co v Suzlon Energy Ltd (No 5)[2011] FCA 176

CORRIGENDUM

1.    On the orders page and the reasons for judgment page the name “SANJEEV BANGAD Third Cross Defendant” should read “SANJEEV BANGAD Third Second Cross Defendant”.

2.    The Parties list on the cover sheet was missing the following two party names “BIP HOLDINGS LIMITED (BC# 1419807)” and “MANNING LIMITED (BAHAMAS COMPANY NO 156337)”. They have now been inserted.

3.    On the orders page and the reasons for judgment page the names, “BIP HOLDINGS LIMITED (BC# 1419807) Eleventh Second Cross Defendant” and “MANNING LIMITED (BAHAMAS COMPANY NO 156337) Twelfth Second Cross Defendant” should appear after the words “S RAAM KUMAR Tenth Second Cross Defendant”.

Associate:

Dated: 17 March 2011

THE COURT ORDERS THAT:

1.    Order 1 made on 1 February 2011 be varied by deleting all words after “refer to” and substituting for the party name “LB (Swiss) Privatbank AG” the name “Frankfurter Bankgesellscheft (Schweiz) AG”.

2.    Leave be granted to the Suzlon parties to serve each of the thirteenth, fourteenth and fifteenth second cross defendants in Switzerland, such service to be effected in accordance with Order 8A of the Federal Court Rules together with a copy of the reasons for judgment given on 4 March 2011.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    This is a further application by Suzlon Energy Ltd and its associated companies (the Suzlon parties) to join further respondents to their cross-claim in these proceedings. Substantively, the Suzlon parties are now in the position of plaintiffs in their cross-claim. In effect, the statement of claim has become irrelevant and the other parties to the original interpleaded claim ceased to be involved in these proceedings some time ago. The Suzlon parties now seek to join three Swiss banks with which Rajagopalan Sridhar, a former senior executive of the Suzlon parties, opened accounts, namely Frankfurter Bankgesellschaft (Schweiz) AG, formerly known as LB (Swiss) Privatbank AG (LB (Swiss)), Merrill Lynch Bank (Swiss) SA (Merrill Lynch) and Credit Suisse Group SA (Credit Suisse).

2    I have described in earlier judgments aspects of the alleged maritime fraud and associated claims that the Suzlon parties have alleged against Mr Sridhar, his associate, Mr Bangad and companies through which Mr Sridhar, principally, operated: cf: Beluga Shipping GmbH & Co. KS “Beluga Fantastic” v Headway Shipping Limited (No 2) (2008) 251 ALR 620; Beluga Shipping GmbH & Co v Suzlon Energy Limited [2009] FCA 1020; Beluga Shipping GmbH v Suzlon Energy Limited (No 3) [2009] FCA 1347; Beluga Shipping GmbH v Suzlon Energy Limited (No 4) [2009] FCA 1568.

3    The basis for the proposed amendments has been explained in written submissions prepared by counsel for the Suzlon parties dated 4 November 2010, which are with the Court file, and are supported by a number of affidavits including, two by Kirtikant Vagadia, who is both the head of corporate finance of Suzlon Energy and a member of the Suzlon group’s supervisory council, and by an expert opinion given by a banker, Anthony Martin.

4    I will summarise below the principal examples on which the Suzlon parties relied to illustrate how they allege that each of the three banks assisted Mr Sridhar, and his use of companies that he controlled, to take deposits of and invest and then make payments of very significant sums of money over the course of a number of years. Much of this material comes from documents that the Suzlon parties obtained on subpoena here and in proceedings they commenced in a Federal District Court of the United States which granted limited access to some documents. The Suzlon parties have appealed about some limitations on their access to other materials imposed by the District Court and that appeal is pending. The Suzlon parties allege that Mr Sridhar used his position as a senior executive, first, to enter into contracts with companies he controlled to ship goods and, secondly, to arrange with some of their suppliers for payments of fees or secret commissions to companies he controlled.

Test for granting leave to serve outside australia

5    I discussed the requirements to justify an order granting leave to serve out of jurisdiction under O 8 r 3 in Beluga (No 2) 251 ALR 620. In expressing these reasons I am proceeding on the basis of the test applicable to justify the grant of leave to serve a proposed foreign party outside Australia under O 8 r 3 as explained by Finn, Weinberg and myself in Ho v Akai Pty Ltd (In liq) (2006) 24 ACLC 1526 at [10]; see too Beluga (No 2) 251 ALR 620 at 627-628 [32]-[33], namely:

“As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case: see e.g. Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390. It “should not call for a substantial inquiry”: WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476; see also Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549. For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed: Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 110. Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376:

‘What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.’”

6    The material in evidence and the proposed pleadings relied on in this application cover a wide field and make serious allegations against, among others, the three Swiss banks. I have not been required to consider whether those allegations are well founded and nothing I say is intended to suggest that they are or are not. The sole issue before me, and the only one on which I have formed a view, as I am required to do by O 8 r 3, is whether, as Lee J explained in Century Insurance Ltd v New Zealand Guardian Trust Ltd [1996] FCA 376, the evidence and proposed new pleadings before me show that a legal controversy exists between the Suzlon parties and each of the three banks that warrants the use of the Court’s resources to resolve it and whether the Suzlon parties have justified the proposed joinder of each bank in this litigation in the Court.

7    However, I have not formed any view on the underlying merit of the Suzlon parties’ claims. First, those claims have been advanced in the absence of any one to represent the current cross-respondents and the proposed new ones, being the banks, and who could put evidence or argument against the current application. Secondly, the evidence on this interlocutory application includes material that is hearsay and may not be admissible in a final hearing. Thirdly, as Dixon CJ appositely said in The Pontificial Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 20, albeit in a different context:

“Experience of forensic contests should confirm the truth of the common saying that one story is good until another is told …”

Here, the banks have had no chance in the litigation to begin examining the validity of the Suzlon parties’ assertions, let alone to tell their story.

8    Thus, all that I am concerned with here is to assess whether, what the Suzlon parties have presented as their current position, in what may be to a lesser or greater degree an incomplete version of their story, is sufficient to establish a prima facie case for the purpose of O 8 r 3 on the test in Ho 24 ACLC 1526 at [10], to justify joinder and service on each bank so that it will be required and able to answer the Suzlon parties’ claims.

9    Since I decided Beluga (No 2) 251 ALR 160 Australia has ratified the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965 (the Hague Convention). It came into force in Australia on 1 November 2010, four days before the Suzlon parties filed their motion. Switzerland is a party to the Hague Convention. Each of the banks is a Swiss company carrying on business in Switzerland and any service for which leave is granted will have to be effected in accordance with the Hague Convention. That is because of the application of O 8A rr 3(1) and (2). These provide relevantly that the provisions of O 8 apply to service in a Hague Convention country of a judicial document relating to civil proceedings in this Court and that the provisions in O 8A prevail to the extent of any inconsistency between those provisions and any other provisions of the Federal Court Rule.

Evidence concerning Mr Sridhar’s dealings with LB (Swiss)

10    Around 25 March 2004, Mr Sridhar telephoned Albert Frehner of LB (Swiss), to discuss opening a bank account. He confirmed that discussion in an email of 25 March 2004, signed by him which bore the identification of the sender as: rodney marsh [sunshineintertrade@yahoo.com.au]. In the email Mr Sridhar explained that he was a resident of India. He said he was proposing to open an account in the name of a company incorporated in the Marshall Islands, Sunshine Trade Services Limited, being the company to which I referred in Beluga [2009] FCA 1020 at [17]-[18]. Mr Sridhar wrote that he was the authorised signatory of Sunshine, and that when he visited in early April 2004, he would have a passport to prove his identity. The email explained that the account would be a “normal” account, with what he expected to be an average 10 to 15 transactions per quarter. Mr Sridhar said that the account was not going to be highly active. He said that the funds in the account would be used mainly for investment in mutual funds, stocks, deposits and the like through LB (Swiss). Mr Sridhar claimed he would be looking for advisory services from the bank. He said that remittances would be received mainly from European companies for consultancy services on the Indian economy and specific industry-related assistance provided by himself and his company. He asserted that he would open the account with a €5000 deposit, and that approximately €25,000 was expected within a month, with a following “… steady stream of approximately €150,000 to €250,000 annually”. Mr Sridhar sought internet banking facilities, as well as cheque books, ATM (automatic teller machine) cards, and credit cards. He wrote that he travelled frequently to Europe.

11    It appears that on about 3 April 2004, after a meeting with Mr Frehner, Mr Sridhar opened two accounts with LB (Swiss), one in Sunshine’s name, the other in his pseudonym of Rodney Marsh. He sought to have all communications made by email only. The bank told him that that could not be done for security reasons.

12    In September 2007, Mr Frehner wrote emails to Mr Sridhar, informing him that as at 31 August 2007, €6.8 million was managed by LB (Swiss) on behalf of Sunshine. He also informed Mr Sridhar that the Rodney Marsh account was then about USD1 million in credit. On 26 September 2007, Mr Sridhar instructed Mr Frehner to transfer USD950,000 from the Rodney Marsh account, to a Credit Suisse account of BIP Holdings Limited. In my reasons in Beluga [2009] FCA 1020 at [20], I referred to what was known about BIP Holdings. Later that day Mr Frehner replied that:

“For such a big transfer we kindly ask you to give us instructions in written form, as mentioned many times in earlier emails from us.”

13    Mr Sridhar and LB (Swiss) appear to have had other dealings, including his request on 14 March 2008 to pay a further €1.25 million to the BIP Holdings account with Credit Suisse. Mr Sridhar’s explanation to LB (Swiss) for that payment was that it represented “agency fees for Q1/2008”. Next, on 22 April 2008, Mr Sridhar asked for a further €750,000 to be transferred to BIP Holdings’ account with Credit Suisse, said to be for agency fees for the second quarter of that year. Sunshine’s bank statement with LB (Swiss) for 13 May 2008 disclosed over €7.3 million being managed by LB (Swiss) on its customer’s behalf.

14    These proceedings commenced in this Court on 23 October 2008. On 12 November 2008 Mr Sridhar, on the Rodney Marsh email account of Sunshine, wrote to Mr Frehner asking about whether he was able to purchase any debt yield funds or convertible debentures in the Indian or Asian markets, and then continued:

“Kindly also refer to our earlier discussions on changes in structure and the changes to be made in your records. We have accordingly enclosed the necessary changes and kindly note the same in your records and delete the previous records.”

The email attached copies of what appear to be minutes of Sunshine filed with the Registrar of Corporations in the Marshall Islands on 17 July 2008 recording changes to its shareholders.

15    On 4 December 2008, Mr Sridhar instructed LB (Swiss) to transfer from Sunshine’s account €1.5 million to Merrill Lynch in Geneva. Next, on 5 December 2008, Mr Sridhar wrote to Mr Frehner and a Karin Oury at LB (Swiss) informing them that new signed forms would be couriered to the bank to enable a Mr Sunny Ahn, a citizen of the Republic of Korea, to become the sole authorised signatory on the Sunshine account. He was to replace all persons then holding powers of attorney for Sunshine, including Mrs Sridhar.

16    On 10 December 2008, Mr Frehner wrote to Mr Sridhar confirming that the documents appointing Mr Ahn as the sole signatory had been received and that from thenceforth the power of attorney in favour of Mrs Sridhar had been cancelled. Nonetheless, on 23 December 2008, Mr Frehner, in an email headed “Confirmation”, wrote to the Sunshine email address asking for instructions by email or by phone to confirm Mr Ahn’s request for the transfer of USD300,000. In response, an unsigned email from the Rodney Marsh Sunshine email account instructed Mr Frehner to go ahead with the transfer as requested, and to confirm by email that it had, which he subsequently did.

17    From then on, it appears in emails in evidence, that Mr Frehner received emails of instructions, still sent using the Rodney Marsh email account that concluded simply with the word “Regards”, without Mr Sridhar’s name. This was a departure from his previous practise of signing such emails, “Sridhar”. Significantly, on 13 January 2009, Mr Frehner emailed the Sunshine account, stating that the German authorities had submitted a request to the Swiss authorities concerning their business relations, including account opening forms, beneficial owner’s signature, as well as incoming and outgoing cash movements. Mr Frehner said that LB (Swiss)’s lawyers had advised it to provide the information requested. Mr Frehner advised Mr Sridhar that, as the customer, he or Sunshine could raise an objection against the decision of the Swiss authorities to pass that information on to their German counterparts.

18    On 14 January 2009, Mr Sridhar responded, on the Rodney Marsh email account, thanking Mr Frehner for the information. Mr Sridhar said that he would try to appoint lawyers. Subsequently, the two corresponded about what might have been the content of the Swiss authorities’ requests. On 27 January 2009, Mr Frehner emailed Mr Sridhar directly, addressing him “Dear Mr Sridhar, We have executed the payment of CHF 7500” to a recipient in accordance with his instructions.

19    Mr Sridhar brought Mr Frehner up to date with his recent developments on 3 February 2009 concerning a number of inquiries that Mr Frehner had made in an earlier email requesting, on behalf of the Swiss Government, information about various companies. These responses included assertions that a company called Inter Alloy Bridge Co belonged to Mr Ahn “… whom you know well. He is the manager and POA holder of Sunshine Trade”. Mr Sridhar wrote that BIP Holdings had been registered in the British Virgin Islands, and that it co-operated with Sunshine in providing joint consultancy services in areas where logistics was an important aspect of the supply chain. He said that Sunshine had at times acted as an agent in collecting freight on behalf of BIP Holdings, and remitted the money to it. He concluded the email: “We also confirm that all transactions made are genuine, and there is no money laundering involved.”

20     Mr Sridhar continued to instruct Mr Frehner in July 2009 in response to the latter’s questioning of the validity of a signature purporting to be that of Mr Ahn, as compared to the bank’s records of that signature. Mr Frehner also sought information as to the beneficial owners of an entity called Blue Ocean Consultants and Sunshine. That was in response to some correspondence sent on the Rodney Marsh account, but signed by “S Ahn”. Mr Frehner said that if the beneficial owners were the same, a transfer between them could easily be arranged. Mr Sridhar, on the Rodney Marsh account, replied, again without signing: “We confirm the beneficiaries are similar for both companies, and request that you execute the transfer”.

Evidence concerning Mr Sridhar’s dealings with Merrill Lynch

21    On 23 April 2007, Mr Sridhar using the Rodney Marsh Sunshine email account emailed Martin Krause of Merrill Lynch seeking to open an account. He referred to a conversation they had just had. Mr Sridhar said that he represented Sunshine, a company incorporated in Marshall Islands, and had two companies in the United Kingdom, Sunstar Trade Services (UK) Limited and Bluewind Enterprises (UK) Limited. He said that he was interested in opening an account for those companies, initially with a few thousand euros, and then said he would “… transfer from my existing Swiss bank account the required funds in a week or so. My existing banker in Zurich is LB (Swiss) Privat Bank”.

22    Mr Sridhar then dealt with Mr Krause and his colleague, Léa Klee at Merrill Lynch. By 7 July 2007, Merrill Lynch had opened an account, at least for Sunshine, and appeared to have given Mr Sridhar some advice. Mr Sridhar had caused €1.5 million to be paid by LB (Swiss) to Merrill Lynch for that purpose. This had come about following some correspondence between Merrill Lynch and Mr Sridhar seeking verification of the identities and details of the three companies (Sunshine, Bluewind and Sunstar) and their officers and of Mr Sridhar’s authority to operate on their behalf.

23    On 6 December 2007, Mr Sridhar provided to Merrill Lynch a certificate of good standing for Sunshine in response to a long outstanding request for such a document. He also sought that Merrill Lynch return the certificate to his Indian address with the original powers of attorney granted by Sunstar and Bluewind that had been provided earlier. In relation to the Bluewind account, he wrote:

“I am facing a peculiar problem on this as the remitter from Germany/Italy is facing too much scrutiny these days if the remittance has to take place in a Swiss bank. To avoid too much hassles from their regulatory authorities, they would prefer a UK bank address since the company is also established in the UK.” (emphasis added)

24    Ms Klee obliged in an email on 10 December 2007, giving Mr Sridhar details of a Merrill Lynch account with the Hong Kong and Shanghai Banking Company in London to which moneys could be paid.

Evidence concerning Mr Sridhar’s dealings with Credit Suisse

25    Soon after the above emails, Ms Klee appears to have transferred her employment from Merrill Lynch to Credit Suisse. By 27 February 2009, Mr Sridhar had asked her to open a new account in an email to Credit Suisse on the Rodney Marsh account. He commenced that email by saying: “I have sent an email from my personal email id”. This clearly tied him to the Rodney Marsh email account. He referred to the appointment of a named chartered accountant in the United Arab Emirates who, he said, was “assisting companies in opening the companies there” (sic) but who “does not know anything else in detail about this new company (Blue Ocean)”. Mr Sridhar required that Credit Suisse direct any further questions about Blue Ocean to himself. He also asked for an account to be opened in Sunshine’s name “about which Lea is aware of from her previous employment”. He supplied some documents of good standing and a copy of his passport.

26    That copy passport had somewhat unusual features. The page containing particulars of Mr Sridhar as the passport holder, had his passport name and all the passport holder’s details, including his date of birth, as well as the passport number all written in hand. There was no familiar computerised print of the passport holder’s details underneath those handwritten details. This unusual form of passport contrasted with the passport of Mrs Sridhar that Mr Sridhar appeared to have supplied at the same time. In her passport, as one might ordinarily expect, apart from Mrs Sridhar’s signature, the passport details and all other entries were in type or computer written, including the usual computer printout at the foot of the page for identification purposes. In addition, Mr Sridhar also supplied a copy of his infant son’s passport which, apart from a finger print, also had all entries in type or computer written form

27    Ms Klee was aware from her previous employment with Merrill Lynch, when she moved to work with Credit Suisse, of the types of dealings which Mr Sridhar had asked Merrill Lynch to undertake and for which he, apparently, followed her to the new employer.

Evidence concerning Mr Sridhar’s alleged secret commissions

28    In his affidavit of 20 October 2010 Mr Vagadia dealt with documents that he had been shown from a number of sources, including documents produced, first, on subpoena by Yahoo!7 Pty Ltd in respect of the emails sent and received on the Yahoo email account with the address sunshineintertrade@yahoo.com.au and, secondly, by Suzlon’s German lawyers, Linklaters. Linklaters’ documents related to proceedings commenced in their nation’s courts by the German tax authorities against a number of persons, including Mr Sridhar, over alleged secret commissions paid since about 2004 to companies associated with Mr Sridhar being some of the cross-respondents.

29    Mr Vagadia described Mr Sridhar’s employment history with the Suzlon parties commencing on October 1999 when he was its assistant general manager of international operations. He said that Mr Sridhar was promoted several times until he became the head of supply chain management of Suzlon Energy on 1 April 2005, a position he held until he was suspended on 5 December 2008. Mr Sridhar’s employment was terminated in May 2009.

30    Mr Vagadia referred to a number of emails that were in the subpoenaed Yahoo documents that appear to show that Mr Sridhar had used his position with the Suzlon parties to arrange for secret commissions to be paid to a number of his nominee companies, which are now cross-respondents.

31    In the German tax proceedings, five corporations who sold goods to Suzlon companies, including August Friedberg GmbH, are alleged to have engaged in tax evasion, corruption and bribery in relation to payments made to, or at the direction of, Mr Sridhar in respect of orders he allegedly caused Suzlon companies to place with those suppliers. The prosecution alleged that nearly €7.2 million had been paid by five German suppliers, namely Friedberg, Lang Systemtechnik GmbH, RS Randach Spezialschruaben GmbH, Bonfiglioli Deutschland GmbH and Svendborg Brakes A/S.

32    Freidberg wrote on 2 October 2007 to a Herrn Clodt of the German Finonzamt stating that the:

“payee and authorised signatory for the account [Sunshine] in Switzerland is:

Mr R Shridhar [sic]

…

Mr Shridhar [sic] is an Indian Citizen.”

33    The letter gave Mr Sridhar’s residential address in Pune, India. Another letter in the German tax proceedings file is on Sunshine’s letterhead dated 2 March 2007 and addressed “To whom it may concern”. It commenced by stating that Sunshine had been informed by its “agency client”, Friedberg and continued:

“… about some questions you have about our organization.

Sunshine Trade Services Ltd is an incorporated company with worldwide transactions.

The main beneficiary is residing in India. There are no separate headquarters.

The contact person of August Friedberg GmbH is Mr. Rodney Marsh. Mr. Marsh can be reached at …, Pune … India. He is acting in India as the official agent for Friedberg, being responsible for staying in contact to the Suzlon Group of companies in India and other companies and for coordinating delivery contracts.

These duties are remunerated by an agreed commission on the turnover between Friedberg and Suzlon/other companies.

Best regards,

FOR SUNSHINE TRADE SERVICES LTD

[Indecipherable signature]

AUTHORISED SIGNATORY” (emphasis added)

The address for Rodney Marsh was the same one as Friedberg gave to Herrn Clodt.

34    Mr Sridhar appears to have given two voluntary interviews to the German prosecutors in late May 2009 while he was under arrest. He asserted that Mr Ahn represented several South Korean companies in relation to Suzlon. Mr Sridhar told the prosecutors that he had been asked by Mr Ahn, whom he claimed to have known since 2000, to open the LB (Swiss) account in order to assist Mr Ahn avoid “unresolved tax problems in Korea”. Mr Sridhar asserted that “[t]here is no employee of [Sunshine] called Rodney Marsh”. In the second interview, Mr Sridhar said that in about August or September 2007 he met with officers of Friedberg and a German lawyer, Jorg Podehl who told him that Friedberg could not pay any more commissions to Sunshine because of “tax problems”. Mr Sridhar said that the Friedberg officers asked if the cessation of commissions would affect its business relations with Suzlon, to which he replied that it would not. In the first interview Mr Sridhar said to the prosecutors that he had told Mr Ahn at around this time in 2007 that:

“I did not wish to represent [Sunshine] vis-à-vis the German companies in the future and would also not be available for further co-operation with [Sunshine]. In this context I also told him that I no longer wished to be the holder of the account with LB Swiss. I also told this to Mr Albert Frehner of LB Swiss over the phone and Mr Ahn then dealt with the rest of the formalities.”

35    Mr Sridhar then claimed that he had several brief meetings in India since mid 2008 with Mr Ahn and had recently had “little contact” with him. He also said to the prosecutors that he had met Mr Ahn in Bochum (where the German proceedings began) on 5 May 2009 and that during “… the aforementioned meetings with Sunny Ahn, we no longer talked about [Sunshine] …”.

36    As noted above, Mr Sridhar appears to have told LB (Swiss) only in about December 2008 that Mr Ahn would be introduced into Sunshine’s dealings with it. On 26 November 2008 an email signed by Rodney Marsh was sent to Mr Ahn on the Rodney Marsh email account in the following terms:

“Dear Mr. Sunny,

As discussed with your friend, your contact details have been given to a couple of German companies. In case any one calls for myself and Sunshine Trade, please receive the calls and take the message and inform that we are travelling. We shall receive and respond once we are back.”

37    Mr Ahn replied the next day saying that he was still in India and agreed to do as he had been requested. He said he would communicate about payment when he returned to Korea.

38    Another of the five accused suppliers, Svendborg was a Danish company with business operations in Germany. In his second interview Mr Sridhar said that he had been shown two emails dated 2006 in which an officer of Svendborg had written to him about difficulties in contacting Rodney Marsh. Mr Sridhar referred to:

“… a resolute suggestion by Rodney Marsh saying that in future I should no longer be contacted personally regarding problems with [Sunshine]. I had informed Mr Ahn about this circumstance who, under the name of Rodney Marsh wrote the aforementioned reply by email. I did not want anything relating to [Sunshine] to be sent to my email address at Suzlon since these transactions had nothing whatsoever to do with Suzlon.” (emphasis added)

39    On 17 June 2008 Svendborg’s Jan Struve sent an email to Rodney Marsh asking whether it would be possible for Suzlon Energy’s sales manager and a manager from another department to sign a draft letter he enclosed. The draft recited that a transaction with Svendborg was currently being considered and that Suzlon confirmed that Suzlon was aware that:

    Sunshine existed and had been engaged by Svendborg since 1999 to assist it with securing customers in the Asian market;

    Svendborg had paid Sunshine a quarterly marketing commission since 2004 based on Svendborg’s sales to Suzlon;

    on 20 May 2008 Svendborg had told Suzlon that the German tax authorities had conducted searches for documents based on the suspicion that the payments to Sunshine were not genuine commissions but unjustified payments to Mr Sridhar.

40    On the same day (17 June 2008) Mr Sridhar, on the Rodney Marsh email account, sent Thetaworld an email forwarding a general agreement between Svendborg and Sunshine dated 31 October 1999 with a signature space for “R. Marsh”. It gave Sunshine’s address in the Marshall Islands. This “agreement” promised a “gratuity of minimum 3%” to Sunshine on sales to Suzlon payable quarterly “for his [sic] exertions of influence in the activities of our customers in Asia”. Suzlon was the only customer named in the document. The “agreement” had a four year term commencing on 1 November 1999 that would be automatically extended for a further five years, unless one party cancelled.

41    This material does not appear to reconcile with material showing that Sunshine was only incorporated in January 2004: see Beluga [2009] FCA 1020 at [17]. Nor do the terms of the 1999 “agreement” appear to reconcile with what Mr Sridhar told the prosecutors in his second interview about the commissions paid to Sunshine. He said that its services “… rather consisted in a kind of follow-up work. For example, if Suzlon was in arrears with payments, the agents of [Sunshine] dealt with the problem by contacting” certain employees of Suzlon.

42    Given that Mr Sridhar appears to have signed the email forwarding the terms of the 1999 “agreement” to Thetaworld on 17 June 2008, I am satisfied that those terms reflect a prima facie case of him arranging secret commissions payable to his nominee, Sunshine, and that Svendborg’s email of the same date acknowledged that it had paid these since 2004. The German prosecutors alleged that those commissions totalled about €840,000. In addition, there appears to be a prima facie case that Friedberg’s payments to Sunshine were also in the nature of secret commissions paid for the benefit or at the direction of Mr Sridhar. The prosecutors alleged that the Friedberg commissions totalled about €907,000.

43    Mr Vagadia said that the scheme of commission payments to Mr Sridhar had been revealed in the German proceedings. He explained that Suzlon’s finance department had limited knowledge and control of practices in companies within the Suzlon group during Mr Sridhar’s employment. Mr Vagadia said that the finance department relied on a system of internal control that required the person responsible for engaging a third party’s services to check and sign an invoice and for that person’s supervisor to approve it. He said that in international transactions the finance department would rely, for example, on checking and signing of an invoice by Mr Bangad and its approval by Mr Sridhar. Mr Vagadia described the payments which he discussed in his affidavits as secret commissions solicited by Mr Sridhar from Suzlon suppliers.

44    Mr Vagadia said in his affidavit of 22 July 2009 that he had been informed by one of Suzlon’s founders, Tulsi Tanti, that he had never been aware of Sunshine, Mr Sridhar’s involvement with it or the payment of the commissions of €7.19 million which the German authorities were investigating.

45    Mr Vagadia did not expressly say that none of the Suzlon parties knew of, or approved, the payments alleged to be secret commissions. However, I have inferred that his use of that very description of the payments – i.e. secret commissions – was intended by him in its ordinary meaning namely, that these payments were secret from the Suzlon parties and unauthorised by them having regard to the standard of proof of a prima facie case for the purposes of O 8 r 3. I have done so assisted by the apparently clandestine conduct of Mr Sridhar, the sensitivity he displayed in relation to emails that had been sent to him at his Suzlon email account by persons dealing with Sunshine and his statement to the German prosecutors quoted above that those “transactions had nothing to do with Suzlon”. Had these transactions been authorised by any Suzlon companies, Mr Sridhar would not be likely to have said to prosecutors investigating these as secret commissions and bribes, that they had nothing to do with Suzlon. The prima facie inference is open on this material that Mr Sridhar obtained payment of those commissions to Sunshine and caused them to be paid to the LB (Swiss) account of Sunshine. The prima facie inference is also open that Mr Sridhar caused money generated by similar transactions and dealings, as well as money sourced from such payments into the LB (Swiss) account, to be paid to the accounts he opened with Merrill Lynch and Credit Swisse.

Mr Martin’s report

46    Mr Martin expressed the opinion, among others, that the examples of banker/customer communications that I have referred to, illustrated, on the part of each of the three banks, failures by them to take appropriate steps to verify the identity of their customer, both at the commencement of their relationships and at various times thereafter. He opined that the material before each of the banks would have put a prudent and competent banker in a position of suspecting that Mr Sridhar and Sunshine “… were concerned in some sort of money laundering with a view to concealing their involvement in a fraud or other crime”. Mr Martin opined that each bank appeared to have failed to act on what he characterised as the suspicious information provided by Mr Sridhar. He said that the banks failed both to ensure that appropriate identification procedures had been followed and to take further steps to verify the source of the funds in the accounts apparently controlled by Mr Sridhar.

47     He concluded that each of the banks failed to take those steps, not merely as a matter of imprudence but also that they deliberately refused further to investigate Mr Sridhar and the source of the moneys in the accounts under his control, when the circumstances warranted such an investigation. His principal reasons for those conclusions were set out by him as follows:

“24.    Although below I deal with individual issues asked of me by the solicitors for the Suzlon Parties, the factors that I have identified which give rise to these conclusions are:

(a)    the use by Sridhar of a pseudonym “Rodney Marsh”;

(b)    the lack of any inquiry at all as to the use of that name by Sridhar;

(c)    the use of Sridhar and [Sunshine] of an internet mail account;

(d)    the high value of the transactions;

(e)    allowing Sridhar and [Sunshine] to ‘self-verify’ transactions;

(f)    not using a trusted third party to verify identities or information;

(g)    at least in the case of LB Swiss:

(i)    opening an account in the name of Rodney Marsh; and

(ii)    tipping off Sridhar as to German and Swiss government investigations into dealings with [Sunshine] and transactions on its account.”

48    Mr Martin observed that on the material to which he had had access, it did not appear that LB (Swiss) had been provided with any document supporting the use of the name Rodney Marsh that justified its opening an account in that name. He said that, of itself, Mr Sridhar’s request to open an account in a false name, would have raised serious concerns that he was engaged in some illegal or fraudulent activity. Mr Martin opined that such a request would indicate to a reputable and prudent banker that Mr Sridhar intended to use the false name in dealings with third parties and wished to transact on an account in a false name. Mr Martin observed that a bank account could be used by individuals as a source of their own identification because it was often assumed that banks out carried out identification checks of their own customers.

49    He noted that, at the inception of the relationship with each bank, Mr Sridhar had been using the name “Rodney Marsh” in emails with the bank. Mr Martin said that such a name could have been used in any signature line, fax or the like sent by remote communication. He said that providing Mr Sridhar with:

“… a bank account in a false name gives to the identity Rodney Marsh the supposed verification of the bank of that identity.

It is extraordinary that any reputable bank would facilitate this conduct by opening an account in a false name.”

50    Mr Martin also observed each of Merrill Lynch and Credit Suisse had made no apparent inquiry, as to the use of the Rodney Marsh name, who he was and, unless the bank knew it was a pseudonym for Mr Sridhar, how, in subsequent transactions an email from Rodney Marsh’s email address could be discerned from an email from Mr Sridhar. In Credit Suisse’s case, Mr Sridhar’s email of 27 February 2009 to it appeared to remove any doubt that he was using the Rodney Marsh email account as his personal email.

51    Mr Martin noted that although Mr Sridhar had provided a passport giving his true name, there was no reference, in the material in evidence, to a passport for Rodney Marsh, let alone any other business documents that identified that person. Mr Martin observed that no information appeared to have been provided to any of the banks to support Mr Sridhar’s use of the name Rodney Marsh. He opined that a reputable bank would thus have been seriously concerned, first, that Mr Sridhar was using a pseudonym in his communications with third parties, secondly, whether identity fraud was occurring and, thirdly, about the possible criminal or fraudulent use of the pseudonym. Mr Martin also opined that Mr Sridhar appeared to be using other identity masking practices, including an internet email account maintained with Yahoo that did not provide, or require, any identity checks. In addition, the email username “sunshineintertrade” was different from that of Sunshine Trade Services, in circumstances where according to Mr Martin’s instructions, the username “Sunshine Trade Services” was available from Yahoo in both the yahoo.com.au and yahoo.com domains.

52    Mr Martin also pointed to Mr Sridhar’s use of an email address within the “.com.au” section level and country level domains. He opined that this suggested a lack of any apparent connection to Australia for the purposes of that company given that Sunshine was a Marshall Islands company and Mr Sridhar resided in India. Mr Martin opined that, in Merrill Lynch’s case, there was additional identity masking in respect of Mr Sridhar’s use of Sunstar and Bluewind because he was able to establish accounts for both those companies despite not being a shareholder or director.

53    Mr Martin explained that application of the banking principle “know your customer” would cause concern to a prudent banker in a position of the three banks. This was because Sunshine had been the recipient of many millions of United States dollars and euros in circumstances where Mr Sridhar claimed that it was engaged in various business activities yet, was dealing with the banks, first, using a free internet email service with a username, “sunshineintertrade”, different from its corporate name and, secondly, he was using the pseudonym, “Rodney Marsh” when dealing with third parties.

54    Mr Martin noted that Merrill Lynch and Credit Suisse had been asked to act on transfers from another Swiss bank (LB (Swiss) or Merrill Lynch, with which one of the entities Mr Sridhar appeared to control held an account. Mr Martin said that the use of a Marshall Islands company, Sunshine, was a further factor to raise concern in a prudent and competent banker. He said that that jurisdiction was known to have low corporate governance controls, and was susceptible to money laundering and other criminal activities. He cautioned, however, that the association of Sunshine with that jurisdiction was not enough, in itself, to raise concerns. Nonetheless, when this was coupled with the other matters to which Mr Martin referred, he considered that the fact that a customer was based in, or conducted business through, such a jurisdiction would not allay the concerns raised by the other factors he noted and was consistent with all those factors being present for illegitimate reasons.

55    Mr Martin’s opinion was that a prudent, competent banker, would want to establish without question the true identity and bona fides of its prospective client or customer regardless of the value or nature of the relationship being contemplated. This would include the banker obtaining original, or properly certified, supporting documentation to establish the bona fides of Mr Sridhar as user of the name Rodney Marsh and an explanation for the other matters to which Mr Martin had referred. He also stated that the relationships which each bank was considering and those established with Mr Sridhar and his companies were both very complex and potentially very large in value. Mr Martin opined that these considerations made it all the more imperative for each bank to satisfy itself of the identity of its proposed or actual customer in order to avoid any fraudulent situation arising in which that customer may be involved.

56    Mr Martin concluded that each bank should have required Mr Sridhar to establish the nature and legitimacy of Sunshine’s business. He observed that in LB (Swiss)’s case, there were evident matters of concern. In particular, Mr Frehner, first, had accepted Mr Sridhar’s assertion that the transfer of €750,000 to BIP Holdings on 22 April 2008 was for “agency fees” for the first quarter of 2008 and, secondly, he had accepted Mr Sridhar’s statement on 15 January 2009 that payments were being made “… to both the companies for business purposes against supplies being made to [Sunshine]”. Mr Martin also referred to Mr Frehner having requested further information from Mr Sridhar on 13 March 2009 because LB (Swiss)’s “compliance officer” was seeking this and his acceptance of Mr Sridhar’s explanation that payments received from Jiangsu Jixin Wind Energy were “agency fees”.

57    Mr Martin opined that because the last two requests had been made by Mr Frehner expressly due to concerns about “compliance”, Mr Frehner appeared to have already formed a concern over the legitimacy of those payments in light of LB (Swiss)’s own obligations under relevant anti-money-laundering legislation. He said that in any event, even if Mr Frehner had not formed such concerns, a prudent banker would have.

58    Additionally, Mr Martin referred to Mr Frehner’s request to Mr Sridhar of 20 July 2009, arising out of an apparent discrepancy between Mr Ahn’s signature in a transaction compared with that held on its files. Mr Martin said that it was “most imprudent” of Mr Frehner to seek and accept only an assurance from Mr Sridhar by email that Blue Ocean and Sunshine were beneficially owned by the same person. He opined that those responses and assurances could not have satisfied a prudent banker. In Mr Martin’s opinion, if such a banker failed to make further inquiries, that banker must have deliberately chosen not to inquire further because those circumstances called for investigation. In addition, he considered that Mr Frehner’s conduct, in “tipping off” Mr Sridhar about the Swiss government’s inquiries in January 2009, was imprudent and against the spirit of anti-money-laundering regulations.

59    Similarly, Mr Martin reasoned that a banker in the position of Merrill Lynch and Credit Suisse must deliberately have refrained from making any inquiries, since the facts of which they were aware on the material to which he had referred in his report, required them, first, to know more about Sunshine’s business and, secondly, to seek evidence that it was a legitimate trading business. He said that a banker could request a customer to provide information on a confidential basis, such as the actual contracts under which the agency fees were paid, website information, public records of the business’ transactions and authorisation for the banker to contact the counterparties to its customer’s dealings. After assuming that none of those inquiries was made by a prudent and competent banker, Mr Martin concluded that the decision to refrain from doing so would be deliberate.

60    Mr Martin said that communications between the bankers and Mr Sridhar and the companies with which he was associated were inconsistent with international banking practices. Mr Martin opined that a customer’s instructions sent by email that did not include an authentication process, either by means of code words or internet banking challenge to the responses, were not a sufficient means of authenticating the instructions as having come from the customer.

The legal nature of the proposed case against the banks

61    None of the material in evidence identifies any basis on which LB (Swiss) or the other banks could have opened any account in the name of Rodney Marsh, on a basis other than that it was an account used by Mr Sridhar, and which he controlled.

62    I accept, as counsel for the Suzlon parties has pointed out, it may be that some explanation can be given by the banks that explains how it came about that they acted on email communications from among others, Sunshine and Mr Sridhar using the email accounts of Rodney Marsh [sunshineintertrade@yahoo.com.au] and, simply, sunshineintertrade@yahoo.com.au. These email accounts were in different names to those of the customers known to each bank, namely the fictitious Rodney Marsh name and a different name for Sunshine, from its corporate name, together with a Yahoo email address somehow associated with Australia.

63    The Suzlon parties wish to claim that each bank is liable to it on the basis of the rule in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252 per Lord Selborne LC as approved by Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ in Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89 at 143 [117], 145 [121], 160 [163] namely:

“Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.”

64    The Suzlon parties argued that there is a prima facie case that each bank will be found liable under both the first and second limbs of the rule in Barnes v Addy LR 9 Ch App at 251-252. To use the well-known shorthand, those limbs are “knowing receipt” and “knowing assistance”. They argued that by reason of Mr Martin’s opinion, the documents and circumstances to which I have made reference, together with all of the other material on which Mr Martin opined, each bank was on notice of, and either knew or wilfully shut its eyes to the obvious fact that Mr Sridhar was engaged in fraudulent activity of some type in the course of his trading activities. The Suzlon parties relied on the evidence as to Mr Sridhar’s use of the false name “Rodney Marsh” in the email header, his being able to open an account with each bank in or using that name without any proof of his entitlement to do so, the apparent discordance between Sunshine’s email address, its corporate name, the free Yahoo email account and Australian domain as compared to where Sunshine and Mr Sridhar apparently operated or were based and his use of email on the Rodney Marsh and generic sunshineintertrade accounts rather than through letters, facsimiles or direct meetings.

65    The Suzlon parties contended that when these matters were coupled with receipt and transfer of substantial funds into and out of the accounts opened by Mr Sridhar with each bank, the respective bank either knew, or knew facts that would have put a reasonable bank in its position on notice that Mr Sridhar was seeking to mask his and Sunshine’s identities in relation to the funds being deposited and later transferred. The Suzlon parties argued that the use of false names would be known to the banks or a reasonable banker as showing that Mr Sridhar was seeking to hide the involvement of each of himself and Sunshine in transactions with third parties and that the funds he caused to be deposited had been obtained by him in breach of fiduciary duty or as part of a dishonest and fraudulent design by him.

66    It may be an open question whether the first limb of Barnes v Addy LR 9 Ch App at 251-252 will be found by the High Court to apply to situations in which persons receive property from, or deal with, a fiduciary other than a trustee, as noted in Farah 230 CLR at 140-141 [112]-[113]. But, in any event, the Suzlon parties argued that they have established a sufficient prima facie case to bring their claims against each bank within the second limb, namely, of assisting with knowledge of a dishonest and fraudulent design on the part of Mr Sridhar as a trustee or fiduciary.

67    This argument was based on Mr Martin’s opinion that each bank either knew the facts or must have first, wilfully shut its eyes to the obvious or, secondly, failed wilfully and recklessly to make inquiries that an honest and reasonable banker would have made or, thirdly, had knowledge of circumstances which would have indicated the facts to an honest and reasonable man, of Mr Sridhar’s being engaged in a dishonest and fraudulent design as the source of the moneys he caused to be deposited: cf Farah 230 CLR at 163 [174]. It is important to bear in mind, in this context, that the phrase “dishonest and fraudulent design” in the second limb, must be approached with circumspection as Gleeson CJ and Gummow, Callinan, Heydon and Crennan JJ said in Farah 230 CLR at 168 [179], namely:

What then of the phrase “dishonest and fraudulent design”? Since the widening of the second limb of Barnes v Addy beyond breaches of express trust, attempts commonly are made in corporate insolvencies to render liable on this footing directors, advisers and bankers of the insolvent company. This makes a proper understanding of the second limb important, lest its application prove unjust. As Lord Selborne LC said in Barnes v Addy ((1874) LR 9 Ch App 244 at 251): “There would be no better mode of undermining the sound doctrines of equity than to make unreasonable and inequitable applications of them.” The relevant passages in Consul establish for Australia that “dishonest and fraudulent designs” can include not only breaches of trust but also breaches of fiduciary duty; but any breach of trust or breach of fiduciary duty relied on must be dishonest and fraudulent.”

Jurisdiction - O 8 r 3(2)(a)

68    In previous judgments in these proceedings I found, for the reasons that I gave there, that the Court has jurisdiction in these proceedings for the purposes of O 8 r 3(2)(a) and that the proceedings fall within items 5, 6 and 18 in the table in O 8 r 2: Beluga (No 2) 251 ALR at 629-630 [37]-[43]; Beluga (No 3) [2009] FCA 1347; Beluga (No 4) [2009] FCA 1568.

69    In this application, the Suzlon parties rely on items 5 and 18 in the table to O 8 r 2 namely that, first, the proceedings are based on the recovery of damage suffered wholly or partly in Australia caused by a tortious act or omission (wherever occurring) (item 5) and, secondly, the proceedings are properly brought against a person served or to be served in Australia, and the person to be served has been properly joined as a party (item 18).

70    It is not necessary to consider whether the proceedings can be justified for the purposes of item 5, as I am satisfied that a prima facie case has been made out for the purposes of item 18 in accordance with the test that applies for the purpose of O 8 r 2: Beluga (No 2) 251 ALR at 627-628 [32]-[33].

71    Of course, nothing that I have said in these reasons expresses or is intended to express any final view or predisposition of my mind. I have merely analysed the elements of the material in evidence before me for the purposes of satisfying myself that a prima facie case against each bank has been made out in the sense described in Ho (2006) 24 ACLC 1526, [2006] FCAFC 159 at [10], [45]-[46]; Beluga (No 2) 251 ALR at 627-628 [32]-[33].

72    I am satisfied that the Suzlon parties have established that a controversy exists between the parties that they seek to join, namely the three banks, that warrants the use of the Court’s processes to resolve it and have justified causing each of the proposed new respondents becoming involved in that litigation in Australia.

73    If the material to which I have referred, including that relied on by Mr Martin and his opinions, were found as facts at trial, there is a reasonable prima facie case according to the test that I have referred to, that each bank assisted Mr Sridhar with knowledge of a dishonest and fraudulent design in breach of his fiduciary duties to a third party. The use of the pseudonym Rodney Marsh, on the material before me, appears to point to a prima facie case that each bank was communicating with a person who identified himself to others under a false name. Again, prima facie, it appears that LB (Swiss) permitted him to open an account in a false name without any proper basis. Mr Martin’s opinion, and the material on which it is based, provide a sufficient basis to establish a prima facie case that each bank had sufficient knowledge of the facts to make it liable to the Suzlon parties for having assisted in a dishonest and fraudulent design of Mr Sridhar as a fiduciary.

74    Moreover, in relation to LB (Swiss), the nature of the operations on the accounts that Mr Sridhar opened with it in 2004 appear to have changed out of all proportion to his suggestion, at the inception of that relationship, that only €150,000 to 250,000 would be received annually. Instead, millions of euros were received, some banked in the false name of Rodney Marsh and most were processed on instructions given on the suspicious and not apparently explained email account of Rodney Marsh. Moreover, by January 2009, LB (Swiss) through Mr Frehner was aware, first, of investigations into Mr Sridhar’s activities by government officials and that this arose very soon after Mr Sridhar had suggested that he no longer had associations with, or the authority to give instructions on behalf of, the companies for whom he had previously acted. On the material before me, it appears that despite these facts, Mr Frehner kept communicating with Mr Sridhar, including about what the Swiss or German authorities were seeking and Mr Frehner continued to act on his instructions to transfer the money.

75    Similarly, by December 2007, Merrill Lynch appears to have been on notice that Mr Sridhar was anxious to avoid regulatory scrutiny for transactions occurring on the Bluewind account and had sought a means to deposit money into a Merrill Lynch account through the United Kingdom to avoid such scrutiny. But, once again, Mr Sridhar communicated with Merrill Lynch using the Rodney Marsh pseudonym in respect of transactions by a number of companies he appeared to control in different parts of the world. On the material currently in evidence and on the basis of Mr Martin’s opinion, a prudent banker would have required an explanation for such dealings and transactions and none appears to have given.

76    Ms Klee took such knowledge as she gained from that relationship to her new employment with Credit Suisse. Here again, Credit Suisse received and dealt, on Mr Sridhar’s instructions, with large sums of money in circumstances where that bank was presented with an apparently irregularly issued passport of Mr Sridhar. On its face it looked to have been altered and not to have been issued by the Indian passport authorities, given the handwritten insertions that appeared on it. That passport was more obviously irregular when juxtaposed with passports issued by the Indian authorities in respect of his wife and child with computer printing.

77    None of the material in evidence suggests that any of the banks sought details of or were made aware of any actual contracts or business dealings conducted by Mr Sridhar, Rodney Marsh or any entities that they appeared to control.

78    It is possible that each of the bankers was satisfied by some material not in evidence that there was a legitimate basis for Mr Sridhar’s activities. No doubt, each bank benefitted from the deposit and investment of the substantial funds it received on Mr Sridhar’s instructions which would be a typical and ordinary commercial activity.

Conclusion

79    I am satisfied that, for the purposes of the test of a prima facie case for service outside the jurisdiction, each of the banks would properly be joined as parties under item 18 of the table in O 8 r 2. I am satisfied, on the same basis, that it was likely that the money that Mr Sridhar caused to be paid into the accounts with each bank in the name of Rodney Marsh or the companies he controlled came from activities that he conducted in his alleged elaborate fraud on the Suzlon parties that I have described above and in earlier judgments.

80    The Suzlon parties also argued that the proposed claims against the banks could form part of the maritime claim that arose to found jurisdiction earlier in these proceedings in Beluga (No 2) 251 ALR at 623 [12]-[13]. In this regard they relied additionally on the opinion of the Supreme Court of the United States: Swift & Co v Compania Caribe 339 US 684 (1950) at 690-692 and referred also to Gilmore and Black, The Law of Admiralty (2nd Ed) Foundation Press Mineloa New York 1975 at 41-42. In Swift 339 US at 691, Frankfurter J, for the Court, held that equitable claims incidental to a maritime claim were within the Admiralty jurisdiction saying:

“To deny an admiralty court jurisdiction over this subsidiary or derivative issue in a litigation clearly maritime would require an absolute rule that admiralty is rigorously excluded from all contact with nonmaritime transactions and from all equitable relief, even though such nonmaritime transactions come into play, and such equitable relief is sought, in the course of admiralty's exercise of its jurisdiction over a matter exclusively maritime. It would be strange indeed thus to hobble a legal system that has been so responsive to the practicalities of maritime commerce and so inventive in adapting its jurisdiction to the needs of that commerce.”

81    The Supreme Court held that there was no restriction to bar the grant of equitable relief “…even when that relief is subsidiary to issues wholly within admiralty jurisdiction” (Swift 339 US at 692). It may be, for Australia, that such a concept is, in any event, within the associated jurisdiction of the court conferred by s 12 of the Admiralty Act 1988 (Cth). That jurisdiction extends to the resolution of controversies relating to maritime commerce and navigation: Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 420-421 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ; Beluga (No 2) 251 ALR 623-624 [12]-[13]. For present purposes, it is not necessary for me to come to a final view on that matter: see too Beluga [2009] FCA 1020 at [33].

82    These new claims against each bank appear to be real and substantial and to arise from Mr Sridhar’s allegedly fraudulent conduct that I have summarised above.

83    I am satisfied that, on the material before me, it is appropriate to grant leave to the Suzlon parties to amend their pleadings to join the three banks and to grant leave for the banks to be served in Switzerland under the Hague Convention.

Associate:

Dated:4 March 2011