FEDERAL COURT OF AUSTRALIA

Suzlon Energy Ltd v Bangad (No 3) [2012] FCA 123

FEDERAL COURT OF AUSTRALIA

Suzlon Energy Ltd v Bangad (No 3) [2012] FCA 123

CORRIGENDUM

1.    In paragraph 37 of the Reasons for Judgment, in the seventh line the words “or it” should be deleted.

2.    In paragraph 42 of the Reasons for Judgment, in the seventh line a bracket should be added after “(c))”.

3.    In paragraph 44 of the Reasons for Judgment, in the fourth line of the quote the word “to” should be in bold.

4.    In paragraph 49 of the Reasons for Judgment, in (2) second line the word “had” should read “that”.

5.    In paragraph 53 of the Reasons for Judgment, in the first line the word “form” should read “forum”.

6.    In paragraph 64 of the Reasons for Judgment, in the first line the words “of foreign law” should be inserted after the word “application.

7.    In paragraph 70 of the Reasons for Judgment, in the sixth line the word “by” should go after the word “including”.

8.    In paragraph 72 of the Reasons for Judgment, in the second line the word “an” should read “and”.

Associate:

Dated:        27 March 2012

SECOND CROSS CLAIM

THE COURT ORDERS THAT:

9.    The parties provide to the associate to Rares J short minutes of order to give effect to the reasons for judgment on or before 1 March 2012.

10.    The proceedings stand over to 2 March 2012 for the making of orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

second cross claim

REASONS FOR JUDGMENT

1    On 4 March 2011, I granted Suzlon Energy Ltd and its associated companies (the Suzlon parties) leave to serve the fourth further amended second cross application (the cross application) in Switzerland on three Swiss banks, Frankfurter Bankgesellschaft (Schweiz) AG (known as LB Swiss at the relevant times), Merrill Lynch Bank (Suisse) SA (Merrill Lynch) and Credit Suisse Group SA: Beluga Shipping GmbH & Co v Suzlon Energy Ltd (No 5) (2011) 278 ALR 56 (the service out reasons). The latter company was wrongly named, as events have turned out. The Swiss bank in the Credit Suisse Group that the Suzlon parties had intended to sue, and which has now been named as the fifteenth second cross respondent, Credit Suisse SA (Credit Suisse), has an office in Sydney and was subsequently served there: see Suzlon Energy Ltd v Bangad (2011) 196 FCR 259.

Issues

2    After they were served in Switzerland, each of LB Swiss and Merrill Lynch applied to set aside service of the cross application on it under r 13.01(1)(b) of the Federal Court Rules 2011 (Cth) on a number of grounds, including that the Suzlon parties have not established a prima facie case for any of the relief claimed in the cross application for the purposes of r 10.43(4)(c) (which is relevantly identical to the former O 8 r 3(2)(c) of the Federal Court Rules 1979 (Cth) under which I had granted leave for service out of the jurisdiction). In addition, each of the three banks has applied for:

    a permanent stay of the proceedings against it on the ground that Australia is a clearly inappropriate forum;

    orders that particular paragraphs in the cross application and the third further amended statement of second cross claim (the cross claim) pleaded against it be struck out.

Background

3    Almost all of the principal findings of fact that I made in the service out reasons, Beluga (No 5) 278 ALR at 59 [10]-[50], [52]-[61], have been accepted by the three banks as being supported by the present evidence for the purposes of determining the questions that must be decided on these applications. Similarly, the parties accepted my findings and reasoning on the content and effect of Swiss Law in my reasons in relation to the notices to produce served by the Suzlon parties on each of the banks in September 2011: Suzlon Energy Ltd v Bangad (No 2) (2011) 198 FCR 1 at [30]-[54]. Rather than repeating those findings in these reasons I will proceed on the basis that they form part of the factual matrix for determining these applications.

Further evidence

4    The principal evidence on which the parties relied was tendered on the first day on which I began hearing the interlocutory applications by each of LB Swiss, Merrill Lynch, Credit Swisse to set aside notices to produce served on them by the Suzlon parties. I rejected certain evidence but granted leave to the parties affected to adduce further evidence. The parties adduced more evidence when the hearing resumed. Initially, I had rejected the expert report of Mr Martin as to banking practice when the Swiss banks objected to it at an interlocutory hearing. Previously, I had relied on his report in the service out reasons as providing an evidentiary basis for a reasonable prima facie case, that if proved at trial, would establish that each bank had sufficient knowledge of the facts to make it liable to the Suzlon parties as having assisted Mr Sridhar and his associates with knowledge of a dishonest and fraudulent design in breach of his fiduciary duties owed to a third party: Beluga (No 5) 278 ALR at 71-72 [73]-[78].

5    Mr Martin has now given additional evidence of his considerable specialised knowledge and experience of standards, practices and principles applicable to international payment systems including the “know your customer” or “KYC” principles, regulatory requirements to prevent money laundering and counter-terrorism financing, as well as the prevention and identification of fraud in relation to banks and financial institutions. Having regard to this further evidence, I admitted his evidence on the present applications because I was satisfied that, for the purposes of establishing a prima facie case under r 10.43(4)(c), Mr Martin was suitably qualified to express an expert opinion on the matters in his earlier affidavit on which I had made findings in the service out reasons: Beluga (No 5) 278 ALR at 66 [46]-[79].

6    In addition, the Suzlon parties relied on the report of Dr Alessandro Bizzozero, a Swiss expert in Swiss banking customs, regulations and practices. I accept his evidence for the purposes of the present application with the exception of his concluding observations about Credit Suisse, for the reasons I will give when dealing with its position. Dr Bizzozero had considered the same material as Mr Martin had for his report. Dr Bizzozero opined in respect of the following:

    the Swiss regulatory requirements governing the commencement and subsequent conduct of a relationship between a banker and customer (referred to as a “client” in Swiss parlance) including the monitoring of transactions;

    the appropriate conduct by a Swiss bank of the banker-customer relationship with a customer who is a senior employee of a listed company;

    whether each of the three banks had conducted its relationship with Mr Sridhar in accordance with applicable Swiss banking customs, regulations and practices on the basis of the available material in evidence.

7    Dr Bizzozero recognised that the material on which he was expressing his opinions only gave a partial view of the relationship between each bank and Mr Sridhar and his associated companies. Dr Bizzozero said that this material did not include a potentially significant amount of information about the economic backgrounds of the customers (Mr Sridhar and his relevant companies) and the particular economic transactions that a bank would ordinarily obtain in meetings or communications with its customer. He said that this information would include underlying contracts for which payments were being made or received and documentation to identify the customer and assess his risk profile.

8    In Dr Bizzozero’s opinion it was “quite obvious” that a banker, in the position of each of the three banks, exercising the due diligence required under Swiss law would have classified Mr Sridhar as a higher risk customer at the outset of each of his relationships with the respective bank. That was because, first, Mr Sridhar was a national and resident of India, a country that Swiss authorities considered to be high on their “bribery country index”, secondly, he was active in emerging countries, and thirdly, he dealt with each bank in significant amounts of money, often through offshore companies. Dr Bizzozero said that if a customer or a transaction presents as a higher risk, then the Swiss law requires the bank to become more stringent in observing its due diligence obligations.

9    Dr Bizzozero explained that Swiss Law contained what he described as “due diligence” requirements that a banker or financial intermediary had to follow in respect of its customers. These included that the bank should:

    identify the nature and purpose of the business relationship sought by the customer;

    clarify the economic background and purpose of a transaction or business relationship, if it appears unusual (unless its legality is clear) or, if there are indications that assets are the proceeds of a serious crime or are under the control, or serve the purposes, of organised criminals or terrorism;

    maintain records that will enable both the Swiss banking regulator and an auditor to make an assessment of whether the bank has complied with the Swiss regulations relating to money laundering. For higher risk relationships the bank must maintain and keep up to date a specific “Know Your Customer” document that contains detailed information about the customer’s business and source of funds, as well as information that corroborates the information its customer has provided it. This reflects the international regulatory requirements to which Mr Martin also referred. Swiss law allows each bank to determine its own method of weighing risk factors, but this must be both formalised by the bank and approved by an external auditor: see Arts 6 and 7 of the (Swiss) Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector (the Anti-Money Laundering Act).

10    Dr Bizzozero stated that the due diligence obligations imposed by Swiss Law required a bank to implement an effective and efficient internal control system to detect higher risk relationships. He explained that this involved the bank devising an intelligent weighting of criteria that must be applied to evaluate whether a customer relationship presents as higher risk. Each bank had to have formal procedures in place requiring its staff to assess the risk presented by a customer relationship using the criteria and weighting that the bank had selected. Dr Bizzozero said that the due diligence assessment should consider the following risk factors and matters:

    risk of money laundering. This required consideration of the origin of the customer’s funds having regard to possibilities such as corruption, misappropriation and misuse of company property. In assessing this risk, the bank had to determine what its customer’s activity or business was, what his or her position was in a company (to assess whether he or she could take advantage of his or her position) and the nature of the actual or proposed activity on the customer’s accounts;

    reputational risk. This required the bank to consider the risk to its own reputation posed by its being associated with a scandal, even though the funds the bank received might not have been the proceeds of crime. Dr Bizzozero said that this risk was assessed by considering what the customer’s activity or business was, the nature of the customer, whether the customer had any political influence or links to criminal organisations;

    risk of losing control over a relationship. This required the bank to assess difficulties in documenting or corroborating details about the customer or his, her or its activities. This risk was accentuated the more active the accounts of customers of this class were. Dr Bizzozero said that assessment of this risk involved the bank considering the activities on the customer’s accounts, including any business that the bank did not have documents for, in particular for cash movements, any connection with countries with which the bank did not have a connection, the use by such customers of the accounts for commercial purposes and the customer’s underlying purpose or aim for establishing and using the account;

    risk of financing terrorism. Dr Bizzozero said that this was the most difficult risk to detect because it was essentially related to the use of funds that appeared to have a legitimate origin.

11    As Dr Bizzozzero observed, there was a degree of overlap in the matters that a bank had to assess for each of the above risks. He noted that the bank may need to consider the significance of the criteria overall, rather than separately for each risk in arriving at its assessment of whether the relationship were higher risk. In addition, Dr Bizzozero said that the importance (which I infer means the relative size) of the customer’s assets may accentuate any risk that the bank detected using the weighting criteria.

12    Next, Dr Bizzozero said that once a customer had been identified as higher risk, (as in Dr Bizzozero’s opinion Mr Sridhar should have been) Swiss law required the bank to perform additional due diligence duties. These include:

    doing sufficient research and investigation of the risk of entering into a relationship with the customer. In particular, the bank was not entitled to accept unconvincing explanations from the customer. Rather, it was to consult or investigate sources other than the customer, for example, by obtaining copies of contracts, and investigating websites for corroborating material;

    periodic and regular further due diligence monitoring. This included the bank updating the information it had about the customer, seeking corroborating material, assessing the plausibility of the new material and then checking the more recent information against the bank’s current database on the customer for any possible contradictions.

13    Swiss law required the bank officer responsible for the customer relationship to document each due diligence review and submit that review to whoever in the bank was responsible for making a decision about whether or not to maintain the relationship.

14    Dr Bizzozero stated that Swiss law imposes similar requirements on banks to consider and assess higher risk transactions such as any initial cash deposit of more than CHF (Swiss francs) 100,000. He said that banks had to investigate every higher risk transaction, using substantially the same processes as those for investigating higher risk customers. If a bank cannot understand a transaction and its bona fides from what it knows about the customer, it must obtain sufficient credible explanations, as are appropriate, to justify that transaction, after its own critical examination of this material. For example, a bank would not be justified in proceeding with a high risk transaction involving the deposit of funds simply because the customer said that its interest rate was competitive.

15    Where a customer presented as a similar higher risk, like Mr Sridhar or his associated companies, Dr Bizzezero opined that a bank had to establish and document comprehensive “know your customer” information about the customer’s business and source of funds including obtaining corroborating materials. He said that if activity on the account changed or became different from that suggested by the customer at an earlier time, the importance of obtaining corroborating material became greater, especially when an unexpected transaction occurred on the account.

Dr Bizzozero’s opinion as to the conduct of each bank

16    LB Swiss: Dr Bizzozero noted that on the available material, Mr Sridhar had told LB Swiss in April 2004 that he was a consultant on the Indian economy and acted through his company incorporated in the Marshall Islands. However, Mr Sridhar provided this information at a high level of generality. Later, in March and April 2008, Mr Sridhar merely told LB Swiss that he was paying, first, about €1.25 million and, later, €0.75 million in quarterly agency fees to BIP Holdings from Sunshine’s account with LB Swiss. There was no evidence of LB Swiss seeking further corroborative material (see the service out reasons: Beluga (No 5) 278 ALR at 59 [10], [13]). Dr Bizzozero opined that in order to comply with Swiss law due diligence obligations, LB Swiss should have obtained precise information and corroboration of Mr Sridhar’s and his companies’ professional situation. In Dr Bizzozero’s opinion, LB Swiss could not have complied with its due diligence obligations under Swiss law when it effected the significant transfers by Sunshine to BIP Holdings merely by relying on the general information in Mr Sridhar’s emails to LB Swiss.

17    Moreover, Dr Bizzozero noted that LB Swiss had permitted Mr Sridhar to open, and engage in business transactions using an account in the pseudonym, Rodney Marsh. The expert stated that the Swiss banking regulator did not permit banks to allow accounts to be opened under pseudonyms. And, as Dr Bizzozero said, it is unlikely that a person or company would be acting honestly in using a pseudonymous account to pay a consultant for work he or she did for the company.

18    Dr Bizzozero opined that LB Swiss had not acted in accordance with its due diligence obligations in its dealings with Mr Sridhar. He concluded that LB Swiss ought to have made in depth inquiries because:

    by September 2007, Mr Sridhar’s accounts were about €8 million in credit, being a balance very significantly greater than the nature of banking business that Mr Sridhar had described at the inception of the relationship in 2004;

    its customer was conducting a portion of its or his business through a Marshall Islands incorporated company;

    Mr Sridhar’s explanations of the background of the economic transactions he and his associates were effecting, that he had supplied to LB Swiss, were “very generic”;

    its customer was acting in a way that “attested of a will” to conceal its identity.

19    After becoming aware in January 2009 of the interest of German authorities in Mr Sridhar’s accounts, LB Swiss continued to accept his uncorroborated answers to its queries and even suggested in an email sent in July 2009 how he should answer them: see the service out reasons: Beluga (No 5) 278 ALR at 60-61[17]-[20]. Dr Bizzozero opined that this conduct also was a failure by LB Swiss to act in accordance with its due diligence obligations.

20    Merrill Lynch: Dr Bizzozero observed that Merrill Lynch appeared to have received more detailed information from Mr Sridhar than had LB Swiss. He noted that Merrill Lynch had information that Mr Sridhar was active in the field of wind energy “and, presumably, he held an important position in a company active in this area”. Dr Bizzozero also noted that Merrill Lynch was informed that Mr Sridhar’s employer worked with a few other Merrill Lynch customers who were executives or employees in the wind energy industry. The expert opined that Merrill Lynch was unlikely to have been aware of Mr Sridhar’s employer since he was permitted to invest in Suzlon shares.

21    Nonetheless, Dr Bizzozero opined that, on the evidence, Merrill Lynch had failed to act in accordance with its due diligence obligations because it did not, first, obtain corroboration of Mr Sridhar’s employment situation and, secondly, understand his and his companies’ actual business situation. The expert reasoned that because Merrill Lynch was aware that Mr Sridhar was an executive of a major and or listed company, it ought to have assessed the risks related to misuse of funds, mismanagement, private corruption or insider trading.

22    Dr Bizzozero referred to the events of 6 December 2007 that I described in the service out reasons: Beluga (No 5) 278 ALR at 61 [23]. These involved Mr Sridhar informing Merrill Lynch that German and Italian regulators would cause “hassles” if a remittance from their countries was sent to a Swiss bank and he asked if he could have the remittance made to an account with Merrill Lynch in the United Kingdom. In Dr Bizzozero’s opinion, this email should have triggered a doubt for a Swiss bank, in Merrill Lynch’s position, acting in accordance with its due diligence obligations, about the legality of previous transfers that its customer had received into its account. He observed that there was no reason for a company that was acting honestly, not to pay commissions into a Swiss bank account.

23    Dr Bizzozero also referred to Merrill Lynch’s apparent failure to fulfil its due diligence obligations in respect of a request made on 9 April 2009 by Mr Sridhar to Mr Krause to transfer €500,000. That transaction resulted from an email sent and signed by Mr Sridhar on the Rodney Marsh email account to Mr Krause of Merrill Lynch on 9 April 2009 instructing the bank to transfer €500,000 from Sunshine’s account to the Credit Suisse account of Blue Ocean. Mr Krause replied asking Mr Sridhar to sign an instruction authorising the transfer and to fax or email the signed document so that the bank could proceed with the transfer. On 20 April 2009, Merrill Lynch effected the transfer of the €500,000 and advised Mr Sridhar of it by email. However, on the material in evidence, Mr Krause did not ask Mr Sridhar anything about the reason for this transaction. Dr Bizzozero observed that Merrill Lynch had not sought “elements of comfort” from Mr Sridhar and that this indicated a breach of its due diligence obligations under Swiss law.

24    Dr Bizzozero opined that Merrill Lynch had failed to fulfil its due diligence obligations because:

    it had not taken any steps to avoid the risk of fraud in circumstances where Mr Sridhar was active in the field of wind energy and held a senior position in a company operating in that field;

    it had not given consideration, after learning of them, to the existence of concerns of the German and Italian regulators about the payment of commissions from those jurisdictions into a Swiss bank account. Dr Bizzozero considered that this information should have raised doubts in a bank about the legality of the customer’s business;

    it had not obtained corroboration of the €500,000 transaction in April 2009;

    Mr Sridhar communicated with it using a pseudonym email address.

25    Credit Suisse: Dr Bizzozero opined that, other than its agreeing to communicate with Mr Sridhar using the pseudonymous email address, he was not able to identify any failure of Credit Suisse to comply with its due diligence obligations. However, Dr Bizzozero held a doubt about the consequence of Mr Sridhar informing Credit Suisse in an email of 27 February 2009 that the person in the United Arab Emirates, who held a power of attorney for Blue Ocean “does not know anything else in detail about this new company”: see the service out reasons: Beluga (No 5) 278 ALR 56 at [25].

Other evidence

26    Mr Vagadia gave further evidence that in June 2010 he had been informed by Dr Marc Russenberger, a Swiss lawyer acting for Suzlon Energy that a Swiss public prosecutor in Geneva was investigating potential breaches of Swiss money laundering laws by Messrs Sridhar, Bangad and Ahn. Those investigations have continued.

27    Mr Vagadia also said that Mr Maurice Hariri, a Swiss lawyer from another firm, also acting in Geneva for Suzlon Energy, had told him in August 2011 that Mr Hariri asked the Swiss public prosecutor for access to prosecution documents obtained in the investigation for review. Mr Hariri was granted that access and reviewed the documents. These revealed that approximately USD18 million is held, frozen, in Mr Sridhar’s and his companies’ accounts with the three Swiss banks. Mr Sridhar made 11 attempts to be granted access by the investigating magistrate to funds in those accounts between November 2009 and August 2011. The investigating magistrate granted nine of those requests. Those involved either some minor sums being paid to third parties or internal re-arrangements of the way the funds were held by the banks. Mr Vagadia learnt that, in late October, Mr Sridhar had been released on bail from prison in Pune, India.

28    LB Swiss and Credit Suisse led evidence that each of its still current and former employees (including Ms Klee) who appear to have had dealings with, or responsibility for, Mr Sridhar’s and his associated companies’ accounts, considered himself or herself bound by Swiss banking secrecy laws and is unwilling to come to Australia to give evidence in breach of those laws. Merrill Lynch led evidence that any witness it was likely to call resided in Switzerland.

29    Credit Suisse’s Swiss Private Banking services are conducted in Switzerland for its foreign based clients. That service is conducted through Swiss banking centres of Credit Suisse in Switzerland. The physical and electronic records of its Swiss Private Banking services are located in Switzerland and are not accessible from Credit Suisse’s operations in Australia. Its Australian office and employees do not deal here with operations, customers or accounts of Swiss Private Banking service and have no access to its records of the latter service.

30    Each of LB Swiss and Merrill Lynch has no office branch in Australia and conducts private banking business in Switzerland for Swiss or foreign domiciled customers. While Merrill Lynch has related companies in Australia, none of those has any involvement with the Swiss bank that is the fourteenth second cross respondent.

Prima facie case – the bank’s submissions

31    Both LB Swiss and Merrill Lynch argued that the Suzlon parties had failed to prove a prima facie case against them to the standard required in r 10.43(4)(c) as explained in the authorities on its predecessor (O 8 r 3(2)(c)), such as Ho v Akai Pty Ltd (in liq) (2006) 24 ACLR 1526 at 1529 [10] per Finn, Weinberg and Rares JJ. All parties accepted this test as applicable to r 10.43(4)(c). The banks accepted, for the purposes of these applications, that Mr Sridhar had obtained secret commissions in breach of his duties owed to the Suzlon parties and had paid proceeds of those illicit dealings into and from each of the accounts opened with the three banks, as described in the service out reasons: Beluga (No 5) 278 ALR at 65-66 [45].

32    However, the banks argued that the Suzlon parties had not established a prima facie case that any of them had knowingly received those moneys or knowingly assisted Mr Sridhar in his dishonest and fraudulent design within either of the two limbs in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252 per Lord Selborne LC as approved in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89: see the service out reasons: Beluga (No 5) 278 ALR at 69-71 [63]-[67]. Credit Suisse did not argue that the Suzlon parties had to establish a prima facie case against it, since it had been served in Australia. But, Credit Suisse argued that the case against it was flawed on the same basis as contended for by the other two banks and that consideration was relevant to its claim for a stay. The other two banks contended that the opinion of Dr Bizzozero amounted to no more than establishing that each bank may have been negligent because it failed to exercise due diligence. They argued that Mr Martin’s evidence did not take the case against each of them further than Dr Bizzozero’s and that the latter was more conversant with Swiss law.

Did the Suzlon parties establish a prima facie case?

33    In Farah 230 CLR at 163-164 [174], [177] Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ held that each of the following was sufficient to establish the element of “knowledge” for the purposes of the second limb in Barnes v Addy LR 9 Ch App at 251-252, applying what Peter Gibson J had said in Baden v Société Générale pour Favouriser le Dévelopment du Commerce et de l′Industrie en France SA [1993] 1 WLR 509 at 575-576, 528, namely:

“(i)    actual knowledge;

(ii)    wilfully shutting one’s eyes to the obvious;

(iii)    wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make;

(iv)    knowledge of circumstances that would indicate the facts to an honest and reasonable man.”

34    Their Honours said that the fourth category ensured that “the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons”. The High Court held that the “second limb” extended to dishonest and fraudulent designs that were breaches of fiduciary duty: Farah 230 CLR at 164 [177]-[179].

35    In this respect it is important to recognise that the prima facie case required by r 10.43(4)(c), is one in which, on the material before the Court, inferences are open that, if translated into findings of fact, would support the relief claimed. That is, a controversy has been shown to exist that warrants the use of the Court’s processes to resolve it and the involvement of the foreign respondent is justified: Ho 24 ACLC at 1529 [10]. The following matters in relation to each of LB Swiss and Merrill Lynch support the findings that I made in my service out reasons in respect of each bank and rely on here: Beluga (No 5) 278 ALR at 71-72 [72]-[78].

36    LB Swiss: I reject LB Swiss’ argument that all that Dr Bizzozzero’s evidence amounted to was that by failing to fulfil its due diligence obligations, it was negligent. As I have set out above, he opined that the Swiss banking regulator did not permit a bank to do what LB Swiss did in allowing Mr Sridhar to open and operate an account under the pseudonym “Rodney Marsh”. He also opined that LB Swiss had not acted in accordance with its due diligence obligations and had failed to make in depth inquiries in respect of a number of matters. Each of those matters is capable, in the circumstances, of establishing more than that LB Swiss was negligent. A court could use the banks’ failures to exercise due diligence that Dr Bizzozzero identified as a basis for a finding that each banks’ conduct was sufficiently egregious as to amount to its having knowingly received the Suzlon parties’ moneys or knowingly assisted Mr Sridhar in his dishonest or fraudulent design.

37    I am of opinion that, on the evidence before me, there is a reasonable prima face case that LB Swiss allowed Mr Sridhar to open and operate the Rodney Marsh account in circumstances where it could be found to have knowingly assisted him in his dishonest and fraudulent design. There is sufficient evidence to establish a prima facie case that LB Swiss had knowledge, in at least the second, third and fourth senses explained in Farah 230 CLR at 163 [174], of Mr Sridhar’s apparently dishonest intention inherent in the use of a bank account opened in a false name or it and what it must have known to be the probability that Mr Sridhar wanted to operate that account to disguise his connection to the moneys paid into and out of it.

38    Merrill Lynch, in commenting on LB Swiss’ position, argued that Mr Sridhar’s use of the Rodney Marsh pseudonym could be explained as that of an Indian “cricket tragic” fan of the former Australian test cricketer of that name and that he was using it as an email address for an innocent purpose. (I hasten to add that there is no basis at all to think that the real cricketer, Rodney Marsh, had anything to do with these events.) Whether that unsupported speculation had a basis or not, the ineluctable fact is that LB Swiss knew of the contemporaneous uses of the email and bank account pseudonyms including the very large amounts that came to be deposited in that bank account. I reject that argument about Mr Sridhar’s use of the pseudonym, given the absence of any evidence to support it.

39    As I noted in my service out reasons, by September 2007 the Rodney Marsh account held about USD1 million. Mr Sridhar corresponded with LB Swiss using the same pseudonym. On the material in evidence these matters are more than irregular. It would have been as plain as day to LB Swiss, in the absence of a substantive and substantiated explanation, that Mr Sridhar was involved in significant dishonesty in accumulating money in the account it opened for him in his false name. In addition, Dr Bizzozero said that the Swiss banking regulator does not permit accounts to be opened in false names. The use of a false name for an account opened by an Indian national with a Swiss bank, such as LB Swiss, that is subject to Swiss banking secrecy laws, in the absence of an explanation, has the probable and obvious purpose of enabling the person opening the account to channel moneys through it in dealings with third parties who did not know the person’s true identity.

40    Moreover, the Swiss banker would know that it could not reveal any details about its customer or the customer’s accounts to any third party by reason of Swiss banking secrecy laws. In this context, a Swiss banker had to seek and obtain a credible explanation from Mr Sridhar as to why he was using an email account with the pseudonym “Rodney Marsh” and why he wanted to open and operate a bank account in that pseudonym. Swiss law required a bank to exercise its due diligence obligations in relation to both its customers and, where the customer is higher risk, the customer’s transactions.

41    A Swiss bank that opened an account in a pseudonym and either did not ask its customer about, or, if it asked, did not receive a credible explanation for, the customer’s use of a pseudonym in its emails and desire to open an account in the pseudonym, is likely to be found to have knowledge that its customer was using the pseudonym and intended to use the account, if opened, for a dishonest and fraudulent purpose or design. The more is this likely in the context of LB Swiss’ dealings with Mr Sridhar, having regard to Dr Bizzozero’s evidence that I have set out above.

42    For the reasons above and in my service out reasons, I am satisfied that the Suzlon parties have established a prima facie that LB Swiss knowingly assisted Mr Sridhar in a dishonest and fraudulent design. Accordingly, it is not necessary to consider the knowing receipt claim in light of this finding: Ho 24 ACLC at 1535 [45]-[47] applying Bray v Hoffmann-LaRoche Ltd (2003) 130 FCR 317 at 331-333 [47]-[55] per Carr J, 354-357 [176]-[191] per Branson J. In the latter case, Carr J and Branson J held that O 8 r 3(2)(c) of the Federal Court Rules 1979 (now reflected in r 10.43(4)(c) only required an applicant to establish a prima facie case for the relief sought in respect of any one cause of action relied upon against the foreign party.

43    Merrill Lynch: I am also satisfied that the Suzlon parties have established a sufficient prima facie case of knowing assistance under r 10.43(4)(c) against Merrill Lynch for the reasons below and in my service out reasons.

44    On 24 April 2007, Mr Krause sent Mr Sridhar a printed presentation about Merrill Lynch when he first enquired about opening an account. That presentation commenced :

“At Merrill Lynch Bank (Suisse) S.A., we understand that being a Swiss bank entails far more than simply being a bank in Switzerland. At the heart of a true Swiss banking relationship is a deep appreciation of the high level of discretion, professional expertise, commitment to service and privacy that our clients require.” (emphasis added)

45    I infer that the “commitment … to privacy” referred to in that presentation reflects the effect of Swiss banking secrecy laws. Depending on the circumstances, a customer’s desire for privacy in using a pseudonym in correspondence could suggest impropriety on the customer’s part to an ordinary person sufficient to amount to knowledge that the customer was using the bank in a dishonest and fraudulent design: Farah 230 CLR at 164 [177].

46    I accept Dr Bizzozero’s evidence that on the available material, Merrill Lynch failed to fulfil its due diligence obligations in respect of Mr Sridhar and his companies. Although Merrill Lynch did not open an account in the pseudonym, it dealt with a customer who was using its services in respect of very substantial sums of money, when he adopted a pseudonym. During the course of the relationship Mr Sridhar told Merrill Lynch that he was concerned not to send money directly to his Swiss bank account for fear of the transaction coming to the notice of German and Italian regulators. Merrill Lynch assisted Mr Sridhar to use a bank account in London to avoid those regulators. On the evidence, Merrill Lynch did not ask Mr Sridhar why he was seeking to avoid the scrutiny of regulators in two countries that would be attracted by his dealings with it as a Swiss bank. It is difficult to understand, on the evidence, why apart from a customer’s desire to use the shield of Swiss banking secrecy, a payment to a bank in the United Kingdom would not attract the regulators’ attention in the way a payment to a Swiss bank would. Dr Bizzozero opined, and I accept, that such a request would raise the concern for a Swiss bank in Merrill Lynch’s position that a customer acting honestly would not have any reason to avoid having a payment made to his Swiss account.

47    Credit Suisse: I am not satisfied that Dr Bizzozero’s view of the position of Credit Suisse was correct. He did not examine the fact that Mr Sridhar seems to have followed Ms Klee from Merrill Lynch to Credit Suisse. Mr Sridhar told Credit Suisse that she was aware about Sunshine “from her previous employment”: see the service out reasons: Beluga (No 5) 278 ALR at 66 [25]-[27], [76]. Nor did Dr Bizzozero consider the unusual features of Mr Sridhar’s passport to which I referred in those reasons: Beluga (No 5) 278 ALR at 66 [26], [31]. For the reasons that I gave in the service out reasons, I remain satisfied that there would be, were it necessary to establish it, a sufficient prima facie case against Credit Suisse to have justified service out of the jurisdiction on it.

48    Of course, if the banks’ side of the relationships with Mr Sridhar and his companies were in evidence, it may be that there would be a good explanation that justifies the dealings and transactions that each of the banks had. The evidence of Dr Bizzozero and Mr Martin that I admitted after considering the banks’ objections supports the findings that I made in the service out reasons on the issue of a prima facie case and I am satisfied that those findings should also now be made in these applications.

The parties submissions as to clearly inappropriate forum

49    The Suzlon parties argued that Australia was not a clearly inappropriate forum because, so their arguments ran:

(1)    each of the second named second cross claimant, Suzlon Energy Australia Pty Ltd (Suzlon Australia) and Credit Suisse was a party present in Australia;

(2)    the Suzlon parties had suffered some loss and damage here arising out of the circumstances in the proceedings had commenced in late 2008. Then, a shipowner brought interpleader proceedings so as to discharge a cargo of Suzlon wind turbines it had carried to Port Kembla on MV Beluga Fantastic while a charterer and some of the Suzlon parties, including Suzlon Australia, were in a dispute that subsequently evolved into the present form of proceedings. The Suzlon parties contended that they had particularised in their cross claim that they had to pay USD7 million into (this) Court, incur demurrage and pay the Marshal’s (scil: Sheriff’s) costs and expenses associated with the discharge of the cargo and the interpleader: cf Beluga Shipping GmbH & Co v Headway Shipping Ltd [2008] FCA 1791;

(3)    the banks had not identified any prejudice in litigating here;

(4)    the banks had not established that Swiss courts would have jurisdiction over Mr Sridhar and his companies;

(5)    it would not be appropriate to segregate the part of the matter involving the banks from the balance of the proceedings that the Suzlon parties were litigating here. The Court had a duty under s 22 of the Federal Court of Australia Act 1976 (Cth) to avoid multiplicity of proceedings. In effect, the Suzlon parties contended that the banks were proper and necessary parties to the overall proceedings on the cross claim. They noted that no precedent had been cited by the banks in which a court had stayed proceedings against some, but not other, parties on the ground of the Court being a clearly inappropriate forum or under the principle of forum non conveniens;

(6)    the cross claim alleged an international maritime fraud that was justiciable here because of the extended and special nature of the “Admiralty and maritime” jurisdiction exercised by Australia under s 76(iii) of the Constitution and by the Court under s 12 of the Admiralty Act 1988, relying on Owners of “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 423-424.

50    Each of the banks argued that Australia was a clearly inappropriate forum within the test identified in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. This was because, they contended:

(1)    none of the transactions, potential witnesses or events now the subject of the proceedings had anything to do with this jurisdiction;

(2)    Swiss law governed the relationship between each of the banks and its customers, being Mr Sridhar and his associated companies;

(3)    the events involving each bank occurred in Switzerland and all documentary and electronic evidence was located there together with most of the current and former employees of the banks who could give evidence as to the transactions;

(4)    the effect of Swiss banking secrecy laws was to prevent the banks and their current and former employees leading any evidence at all here, or even pleading a defence;

(5)    if proceedings were brought against the banks in Switzerland, a Swiss Court will have power to require, first, the banks to produce documents and, secondly, their current and former employees present in that country to give evidence;

(6)    Australian law was not the proper law of any part of the controversy, since it was likely that any breaches of duty by Mr Sridhar and other ex-Suzlon employees would be governed by Indian law and the liability of the banks was likely to be governed by Swiss law;

(7)    the Suzlon parties had not pleaded that they had suffered any loss in Australia. The only connection that Suzlon Australia had was, as Mr Vagadia had explained, to be a local marketing subsidiary that took delivery of products shipped here that another Suzlon group company had manufactured and then Suzlon Australia supplied those products to a local customer.

Consideration

51    In Voth 171 CLR at 565 Mason CJ, Deane, Dawson and Gaudron JJ suggested that, in “the ordinary case” of a stay application on the ground of clearly inappropriate forum, counsel should be able to furnish the primary judge with any necessary assistance by a short, written and preferably agreed summary identification of relevant connecting factors “and by oral submissions measured in minutes rather than hours”. Their Honours had described earlier approaches dealing with this difficult area as involving “a war of affidavits” (171 CLR at 558). That encouragement seems to have bypassed these applications. However, complexity of stay applications now appears to be an accepted consequence of the exercise of “long arm” jurisdiction by superior courts in Australia, as recognised in Regie Nationale des Usiness Renault SA v Zhang (2002) 210 CLR 491 at 519 [73] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. These applications have involved one day’s hearing on preliminary issues culminating in my judgment and orders of 7 October 2011 (Suzlon (No 2) 198 FCR 1), two days of hearing, about 100 pages of submissions and over 2,000 pages of evidence about which I must now decide.

Clearly inappropriate forum – the principles

52    The following propositions emerge from the majority reasons in Voth 171 CLR 538, with which Brennan J agreed at 572:

1.    An Australian court must exercise jurisdiction that is conferred on it, except where it is established to be a clearly inappropriate forum (171 CLR at 559).

2.    In cases where the Court has a discretion to grant leave to serve outside the jurisdiction, it is relevant to consider the appropriateness of the forum in exercising that discretion (171 CLR at 560).

3.    The applicant for either that leave, or confirmation of service effected (here, the Suzlon parties), must satisfy the Court positively that the proceedings would not, or ought not, be stayed as having been brought in a clearly inappropriate forum or as being an abuse of process (171 CLR at 564).

4.    The power to stay (or refuse leave to serve outside the jurisdiction), based on the Court being a clearly inappropriate forum is discretionary, and involves a subjective balancing process, in which various factors and matters of impression, in all the circumstances, are weighed as had been explained by Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247-248 (whose judgment was substantially approved in Voth 171 CLR at 564).

5.    Ordinarily, the local court will not be a clearly inappropriate forum if there is no foreign tribunal that has jurisdiction over the respondent (here the banks) and would entertain the particular proceedings that the applicant wishes to bring (Oceanic 165 CLR at 248). However, where there is no real connection between the subject matter of, or parties to, the litigation, the local court may be clearly inappropriate if the law of the place where the alleged wrong occurred did not allow proceedings to be brought for its redress (e.g. in a jurisdiction where a traffic accident occurred and that had an exclusive statutory compensation scheme, a suit brought in this jurisdiction would be in a clearly inappropriate forum) (Voth 171 CLR 558-559).

6.    The rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case (Voth 171 CLR at 554).

53    Further, a court is not an inappropriate form merely because another is more appropriate: Zhang 210 CLR at 503 [24]. There, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ held that a court’s power to stay proceedings is an aspect of its inherent or implied power to prevent its own processes being used to bring about injustice. They cited with approval the following reasoning of Dawson, Gaudron, McHugh and Gummow JJ in Henry v Henry (1996) 185 CLR 571 at 587 (Zhang 210 CLR at 504 [25]):

“In Voth ((1990) 171 CLR 538 at 564-565), this Court adopted for Australia the test propounded by Deane J in Oceanic Sun, namely, that a stay should be granted if the local court is a clearly inappropriate forum, which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of “seriously and unfairly burdensome, prejudicial or damaging”, or, vexatious, in the sense of “productive of serious and unjustified trouble and harassment” (Oceanic Sun (1988) 165 CLR 197 at 247). It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, “the discussion by Lord Goff in Spiliada ([1987] AC 460 at 477-478, 482-484) of relevant “connecting factors” and “a legitimate personal or juridical advantage” provides valuable assistance” (Voth (1990) 171 CLR 538 at 564-565). In this last regard, Lord Goff of Chieveley expressed the view that legitimate personal or juridical advantage is a relevant but not decisive consideration, the fundamental question being “where the case may be tried “suitably for the interests of all the parties and for the ends of justice”” (Spiliada [1987] AC 460 at 482, quoting Sim v Robinow (1892) 19 R 665 at 668, per Lord Kinnear).”

54    The nature and degree of connection between the proceedings and the forum are fundamental factors in assessing whether the forum is clearly inappropriate: cf McGregor v Potts (2005) 68 NSWLR 109 at 120 [47] per Brereton J; PCH Offshore Pty Ltd v Dunn (No 2) (2010) 273 ALR 167 at 184 [120], 188 [150] per Siopis J.

Consideration

55    In 2009, I raised the question of the appropriateness of Australia as a forum with the Suzlon parties at an earlier stage of these proceedings, at the time when they first joined Mr Sridhar and some companies with which he was associated. I observed then that it was curious that in the proceedings Indian companies were suing Indian residents and companies incorporated in other countries. I noted that none of the parties appeared to have any particular connection with Australia apart from the fact that the proceedings had commenced here, although a very considerable amount of work had been done in them and the Court was already seized of them: Beluga Shipping GmbH v Suzlon Energy Ltd [2009] FCA 1020 at [34]. At that stage of the matter, the Suzlon parties were the only active forensic participants. That remained the position until the banks were joined.

56    The current subject matters of the Suzlon parties’ claims in these proceedings have very little connection to Australia. Although Suzlon Australia and Credit Suisse are present here, that presence is substantively incidental to the real issues that arise in the Suzlon parties’ claims. Those issues concern allegations of:

    a significant commercial fraud perpetrated on the Indian based Suzlon parties by their former senior Indian resident executives, Mr Sridhar and Mr Bangad and some of their subordinates;

    the use of charterparties and other maritime contracts involving the international sale of goods;

    the use of corporate vehicles in various countries, including the United Kingdom, the Marshall Islands, the British Virgin Islands and the Bahamas;

    the use of Swiss bank accounts and Swiss banking secrecy laws.

57    The Suzlon parties have collected some material and evidence from third parties in or as a result of these proceedings, such as Yahoo! That has enabled them to track some of the alleged wrongful transactions, frauds and breaches of fiduciary duty by Mr Sridhar and their other former employees. The Australian lawyers acting for the Suzlon parties have also undertaken obviously detailed work in identifying the claims that are currently pleaded.

58    However, the likely jurisdictional sources of the Suzlon parties’ legal right to redress, if they can establish the alleged wrongdoing at a trial, are principally the law of India and, so far as the banks are concerned, the law of Switzerland. It is adventitious that the initial circumstances on which the Suzlon parties rely came to light in this Court as a result of a shipowner commencing interpleader proceedings to enable it to discharge wind turbine equipment on board its ship. The interpleader was between some of the Suzlon parties interested in the cargo and the charterer of that ship which was allegedly involved in the frauds.

59    Australia and Australian law have no apparent direct application to the facts of the controversy that the Suzlon parties’ cross application raises other than as currently being the forum. In contrast, Swiss banking secrecy laws will have a significant impact on the ability of each of the banks to conduct this litigation in Australia as I explained in Suzlon Energy 198 FCR 1 at [30]-[54]. The consequence is that if the matter were to proceed here, the banks could not give discovery or call or tender any evidence in these proceedings in relation to any of their dealings with Mr Sridhar, his companies or third parties with whom either he or the companies dealt.

60    I am of opinion that it is significant, in resolving the application for a stay, that the banks have not placed themselves in this difficulty by dealings that they conducted in, or that related to, Australia. If any one of the banks had dealt with Mr Sridhar or his companies here or in respect of his conducting some transactions here, then depending on the degree of involvement of the bank, this fact could be an important consideration to be weighed against it. In such a context, the bank’s commercial decision, cognisant of the effect of Swiss banking secrecy laws were it sued here, to engage in dealings in or involving Australia could be relevant to a conclusion that Australia was not a clearly inappropriate forum: cf Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) (1996) 69 FCR 531 at 546C-D, 550G-551C, 552G-553B per Lehane J, Lockhart and ML Foster JJ agreeing. But, that is not this case.

61    Here, the relationship between the banks and Mr Sridhar, as well as his companies, appears to have been entered into in Switzerland and to be governed by Swiss law. Although the Rodney Marsh email account had an Australian domain name, nothing in the evidence suggests that this created a real or commercial dealing or connection here. To the contrary, the expert evidence of Dr Bizzozero and Mr Martin was to the effect that this choice of unusual email address by Mr Sridhar ought to have caused each bank to make enquiries. That was because of one or more of the combination of the pseudonym, the apparently unbusinesslike disconformity between Sunshine’s corporate name and that in its email address, the easily available free “yahoo.com.au” email account and Mr Sridhar’s connections to India.

62    The Suzlon parties’ primary claims against the banks are that each is liable for knowingly receiving money that Mr Sridhar had obtained by breaching his fiduciary duties owed to the Suzlon parties or that each bank had knowingly assisted him in his dishonest and fraudulent design. There is no evidence as to whether the principles in Barnes v Addy LR 9 Ch App 244 apply in either Switzerland or India. Those principles have developed differently in different common law jurisdictions such as England and Australia in the 145 years since the English Court of Appeal in Chancery gave its judgment: see e.g. Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 at e.g. [249]-269], [553]-[550] per Finn, Stone and Perram JJ; Michael Wilson & Partners Ltd v Nicholls (2011) 282 ALR 685 at 709 [106]-[107] per Gummow ACJ, Hayne, Heydon, Crennan and Bell JJ; Westpac New Zealand Ltd v MAP and Associates Ltd [2011] 3 NZLR 751. In OJSC Oil Company Yugraneft (In liq) v Abramovich [2008] EWHC 2613 at [184]-[185] Christopher Clarke J said:

“… the constituent elements of a claim in “knowing assistance” provide no reason why it should be treated as governed by the lex fori. The difference between such a claim and a claim in knowing receipt has often been stated. As Hoffmann LJ put it in Polly Peck International v Nadir & Others (Judgment of the Court of Appeal dated 17 March 1993, Lexis Transcript):

“Although both knowing assistance and knowing receipt give rise to the equitable remedy of accountability as a constructive trustee, the two causes of action are very different. Liability for knowing assistance is based upon wrongful conduct, namely knowing participation in a fraudulent breach of trust or fiduciary duty. Its common law analogy is conspiracy to defraud. Liability for knowing receipt is restitutionary based upon the beneficial receipt of money or property known to belong in equity to someone else. The equitable remedy depends upon the existence of a trust or fiduciary duty, but the breach of trust or duty need not have been fraudulent. The nearest common law analogy is money had and received.”

There is no reason why the lex fori should be the applicable law in respect of an accessory liability for dishonest participation in a breach of trust particularly given that in an action of the tort of conspiracy to defraud a claimant must show (under common law and now under statute) that the acts constituting the conspiracy are civilly actionable under the law of the place where the conspiracy was, in substance, committed.”

63    It is a material consideration that, if no stay were granted, Australian law, as the law of the forum would be applicable to ascertain the rights of two sets of foreigners whose relationships and their legal consequences had nothing to do with this jurisdiction other than for the adventitious commencement of this litigation here. Although it is easy enough to infer that the law of each of Switzerland and India provides remedies to employers of fraudulent employees, it would not be realistic to assume that those laws and remedies are the same as here. The Suzlon parties have engaged Swiss lawyers to represent their interests in respect of about USD 18 million in various accounts opened by Mr Sridhar and his companies with the banks that Swiss prosecution authorities have been able to obtain a form of freezing orders from a Swiss Court. Despite the Suzlon parties relying on Dr Bizzozero’s evidence about Swiss banking laws, they called no evidence to suggest that Swiss law offered inadequate or inappropriate remedies against the banks if the material facts pleaded in the cross claim could be proved in a Swiss Court. I infer that the law of Switzerland provides the Suzlon parties with adequate and appropriate remedies for the claims they have made against the banks in the cross claim.

64    The complexity, expense, uncertainty and risk of error associated with the application by a domestic court are matters that should be considered on applications for a stay. As Spigelman CJ observed in Murakami v Wiryadi (2010) 268 ALR 377 at 406 [150] the need to prove foreign law is a source of prejudice that can involve the risk that translation may result in the loss of one or more important aspects. The process of statutory construction of domestic enactments frequently requires a detailed understanding of the meaning of words of our own native tongue and the discernment of subtle nuances of language in order to ascertain the legislative intention of a provision. The quality and accuracy of translation of statutory provisions, however good, may not always succeed in communicating to a foreign reader the precise legal meaning of the text of a statute.

65    The principles of statutory interpretation have evolved in Australia over many years. It is likely that other systems of law have developed their own particular approaches to statutory interpretation which, again, may not be the same as those here. Of course, such considerations may not be decisive of an application for a stay. The existence of choice of law rules shows that the use of foreign law as the lex causae or substantive law by the Courts of the forum is possible: cf Puttick v Tenon Ltd (2008) 238 CLR 265 at 277-278 [31] per French CJ, Gummow, Hayne and Kiefel JJ; Zhang 210 CLR at 521 [81]. Similarly, it is relevant that another significant issue in the claims against the banks will concern the professional standards applicable to Swiss bankers conducting banking business in Switzerland: Voth 171 CLR at 570. That issue interacts with the requirements of Swiss banking law as properly understood.

The discretion to stay

66    The banks seek a stay of the proceedings only against them as opposed to a stay of the proceedings generally. This creates a complicating factor in resolving the question of whether Australia is a clearly inappropriate forum in relation to the Suzlon parties’ claims against the banks. Despite the considerable experience of counsel for the parties in applications of this kind, none was able to refer to any case in which a court had granted a stay in respect of only part of the proceedings or only in respect of some, but not all, respondents or defendants on the principles of forum non conveniens or its analogues, such as a clearly inappropriate forum. Of course, the Suzlon parties do not have to proceed here against any particular cross defendant. And they could sue each bank in Switzerland, or indeed here, without joining all of the other cross defendants in these proceedings.

67    As the Suzlon parties argued, the effect of s 22 of the Federal Court of Australia Act 1976 (Cth) is a significant consideration against granting a stay of part of the proceedings.

“The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.”

68    This imperative requires the Court to avoid, so far as possible, a multiplicity of proceedings in both different courts and within its own jurisdiction: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 186 [17] per French CJ; see too Strong Wise Ltd v Australia v Australia Resources Pty Ltd (No 2) (2010) 185 FCR 237 at 252 [53]-[55] per myself. Earlier, in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 489 Gibbs J, cited Sir George Jessel MR’s explanation in In the Goods of Tharp (1878) 3 PD 76 at 81 of s 24(7) of the Judicature Act 1873 (UK), the progenitor of s 22, that the section meant:

“… that whenever a subject of controversy arises in an action which can conveniently be determined between the parties to the action, the court should, if possible, determine it so as to prevent further and needless litigation.”

69    In Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 161 Gibbs CJ, Stephen, Mason and Wilson JJ described the power conferred by s 22 as being:

“... designed to ensure that the Court can grant relief which is appropriate to both legal and equitable claims and to avoid multiplicity of proceedings. Its effect is to enable the Court to dispose of all rights, legal and equitable, in the one action, so far as that is possible.”

70    The power to grant a stay of part of proceedings is not excluded by the imperative created by s 22. Importantly, s 22 contains the qualification “so far as possible”. The section accepts that the Court will have jurisdiction to determine the whole of the controversies between the parties, but will retain the power to withhold some or all available relief, where that outcome is appropriate. Every court has an inherent or implied power to prevent any abuse of its processes by including the grant of a stay of the whole or part of proceedings. The nature and scope of this power is not susceptible of a formulation comprising closed categories, as Gleeson CJ, Gummow, Hayne and Crennan JJ explained in Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at 265-268 [9]-[16]; see too Zhang 210 CLR at 503-504 [24]-[25]. In Walton v Gardiner (1993) 177 CLR 378 at 393 Mason CJ, Deane and Dawson JJ cited with approval the following passage from the speech of Lord Diplock in Hunter v Chief Constable of West Midlands Police [1982] AC 529 at 536C-D that any court of justice has an inherent or implied power:

“… to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people.”

71    In a civil case such as this, the rationale for the exercise of the power to stay is the avoidance of injustice between parties in a particular case: Voth 171 CLR at 554; Zhang 210 CLR at 503 [25] and Puttick 238 CLR at 277 [29]. In Puttick 238 CLR at 276-277 [27] French CJ, Gummow, Hayne and Kiefel JJ explained that Voth 171 CLR 538 had decided that:

“… a defendant will ordinarily be entitled to a permanent stay of proceedings instituted against it and regularly served upon it within the jurisdiction, if the defendant persuades the local court that, having regard to the circumstances of the particular case, and the availability of an alternative foreign forum to whose jurisdiction the defendant is amenable, the local court is a clearly inappropriate forum for determination of the dispute. The reasons of the plurality in Voth pointed out that the focus must be "upon the inappropriateness of the local court and not the appropriateness or comparative appropriateness of the suggested foreign forum."

72    Ordinarily, it would be desirable and, indeed, necessary for all of the claims of the Suzlon parties arising out of the alleged frauds for which they seek relief to be tried an determined in the one proceeding. As Lord Goff of Chieveley observed in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 485D there is much to be said in favour of all of the controversy being heard and determined in one proceeding in the interests of justice. However, s 22 does not dictate that this generally desirable objective must be given effect come what may.

73    I am satisfied that if the Suzlon parties’ claims against the banks were not stayed, the banks would not be able to defend themselves in these proceedings by pleading substantive defences, giving discovery or leading evidence. That is the consequence of Swiss banking secrecy laws. It is a consequence that has arisen because these proceedings were commenced here, properly, but adventitiously. Nonetheless, the very significant injustice that would be done to the banks if no stay were granted cannot be gainsaid. And, Swiss law provides the Suzlon parties with adequate and appropriate remedies if they can establish there the claims against the banks they seek to bring in these proceedings. It is not necessary that Mr Sridhar or his associates be parties in these or any Swiss proceedings for the Suzlon parties to obtain the relief they seek against the banks.

74    Moreover, the residue of the Suzlon parties’ claims are, and have been to date, undefended proceedings. None of the other cross respondents has appeared. Thus, any findings that might be made in these proceedings against Mr Sridhar, Mr Bangad and their associates will not arise from a contested trial, but will be ex parte. The issues involving those cross respondents cover a wider area than those involving the banks, although the claims against the banks all arise within the claims against the other cross respondents.

75     I am also satisfied that, if sued in Switzerland, while the banks would be able to avail themselves of such defences as Swiss law affords them, they would be subject to the effective control of the Courts of that nation in relation to the furnishing and giving of evidence, unlike here. Since the Suzlon parties could obtain adequate and appropriate relief if they sue the banks in Switzerland in respect of the essential subject matter of their claims in these proceedings, the interests of justice as between the Suzlon parties and the banks dictate that this is a clearly inappropriate forum. Provided that appropriate conditions on the grant of a stay will protect the legitimate rights of the Suzlon parties it would be manifestly unfair to require the banks to remain active parties in these proceedings in those circumstances.

Conclusion

76    I am of opinion that on the evidence and balancing the competing interests and arguments of the parties there is a substantial, if not overwhelming, preponderance of factors in favour of granting a stay, provided that the Suzlon parties’ rights against the banks can be protected by appropriate conditions. The following conditions should be enforceable as undertakings given to the Court by each bank. First, each bank should not invoke any limitation defence in Switzerland that it would not have been able to invoke here had the proceedings not been stayed. Secondly, each bank should not invoke any objection to the exercise of jurisdiction by the Courts of Switzerland in respect of relief available to the Suzlon parties arising out of the material facts alleged in the cross claim brought against the bank here. Thirdly, the banks should not object or seek to prevent the Suzlon parties from seeking, if they choose, to pursue in the Swiss proceedings their other claims against Mr Sridhar, Mr Bangad and their associates and companies.

77    I will direct the parties to bring in short minutes of orders to reflect these reasons. These should also provide that the Suzlon parties pay the costs of the banks’ interlocutory applications, since the banks have succeeded in obtaining a stay. In light of these conclusions it is not necessary to decide whether any paragraphs in the cross claim should be struck out.

Associate:

Dated:    24 February 2012

SCHEDULE

SECOND CROSS CLAIM

NSD 1670 of 2008

BETWEEN:

SUZLON ENERGY LTD

First Cross Claimant

SUZLON ENERGY AUSTRALIA PTY LTD

Second Cross Claimant

SUZLON INFRASTRUCTURE LIMITED (NOW KNOWN AS SYNEFRA ENGINEERING & CONSTRUCTION LTD)

Third Cross Claimant

SUZLON WIND ENERGY CORPORATION, USA

Fourth Cross Claimant

SUZLON STRUCTURES LTD

Fifth Cross Claimant

SE SHIPPING PTE LIMITED

Sixth Cross Claimant

AND:

SANJEEV BANGAD

Third Cross Defendant

SS OCEANWIND PTE LIMITED

Fifth Cross Defendant

GENUS SHIPPING SERVICES PVT LIMITED

Sixth Cross Defendant

RAJAGOPALAN SRIDHAR

Seventh Cross Defendant

BLUEWIND ENTERPRISES (UK) PTY LTD

Eighth Cross Defendant

SUNSHINE TRADE SERVICES LIMITED

Ninth Cross Defendant

S RAAM KUMAR

Tenth Cross Defendant

BIP HOLDINGS LIMITED (BC# 1419807)

Eleventh Cross Defendant

MANNING LIMITED (BAHAMAS COMPANY NO 15633)

Twelfth Cross Defendant

FRANKFURTER BANKGESELLSCHAFT (SCHWEIZ) AG (A SWISS COMPANY)

Thirteenth Cross Defendant

MERRILL LYNCH BANK (SUISSE) SA (A SWISS COMPANY)

Fourteenth Cross Defendant

CREDIT SUISSE AG (A SWISS COMPANY)

Fifteenth Cross Defendant