FEDERAL COURT OF AUSTRALIA

Cobankara v Australia and New Zealand Banking Group Ltd [2017] FCA 419

ORDERS

THE COURT ORDERS THAT:

1.    The prospective applicants have leave to discontinue the proceeding by filing a notice of discontinuance on or before 1 May 2017.

2.    The prospective applicants are to pay the prospective respondent’s reasonable expenses of giving discovery and production of documents to the prospective applicants.

3.    The prospective respondent is to pay fifty per cent (50%) of the prospective applicants’ costs of the application for preliminary discovery on a party/party basis, to be taxed in default of agreement.

4.    Each party is to bear their own costs of the written submissions filed by the prospective respondent on 20 March 2017 and by the prospective applicants on 22 March 2017.

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

REASONS FOR JUDGMENT

MORTIMER J:

1    Huseyin Cobankara and Serife Cobankara, the prospective applicants in this preliminary discovery application commenced under r 7.23 of the Federal Court Rules 2011 (Cth), were (and it appears, remain) customers of the prospective respondent, the Australia and New Zealand Banking Group Limited (ANZ). They were both recorded as cardholders on an ANZ Frequent Flyer Platinum Card, and used that credit card account for a number of personal and medical expenses.

2    Mr Cobankara had a previous business relationship with an individual called Jeffrey Borg. Through their respective corporations, they engaged in business activities together. Their respective corporations were both shareholders in another corporation, called Maple Properties Pty Ltd. Both Mr Borg and Mr Cobankara had been directors of this corporation, until Mr Cobankara ceased to be a director in June 2011.

3    Mr Cobankara and Mr Borg appear to have had a significant falling out in 2012, which culminated in litigation commenced in August 2013. Prior to the litigation, Mrs Cobankara was granted an intervention order in December 2012 against Mr Borg and his wife. In the second half of 2013, when matters were clearly acrimonious between the prospective applicants and Mr Borg and his wife, Mr Cobankara came to believe that Mr Borg may have had access to some personal financial information of his and his wife’s.

4    By mid-2014, after the ANZ had contacted him, Mr Cobankara realised that the statements for the ANZ credit card were not being sent to him and his wife, but rather to an address associated with Mr Borg. This was of concern to Mr Cobankara and he pursued the issue with ANZ. In his affidavit filed with the application for preliminary discovery he deposed:

On or about 9 October 2014, ANZ Bank advised our then solicitor that on 7 October 2013 a request was made to change the address details from Borg Corporation Customer Lending Group. ANZ refused to comment on the reason why the change of address was requested, claiming that this was a matter for the person who had made the request. ANZ Bank advised that the request was then acted upon by ANZ and the account name and the addresses for the entities in the Borg Corporation Customer Lending Group were changed. I had been told in an earlier discussion with Judy Goodwin of the ANZ Bank that my account had been linked to the Borg Corporation Accounts when I first became a director of Maple Properties, which was in 2008. We believe that Borg Corporate has had online access to our accounts, although ANZ have refused to confirm this.

5    Mr Cobankara then deposed to communications over a period of approximately 18 months, during which his solicitors attempted to secure explanations from ANZ and relevant documents, without success.

6    He had a particular concern, which was expressed this way by him:

The ANZ Frequent Flyer Platinum Credit Card records showed the places my wife shopped on a regular basis, and information relating to private medical treatment and procedures my wife and I had undertaken. This is all information that is confidential to us, and that we would not want Mr Borg, his wife, or others knowing, especially given the intervention order my wife had obtained.

7    He deposed to being informed that:

…my wife and I may have a rights to bring action against the ANZ bank for breach of our privacy, breach of the Privacy Act, for misuse of our confidential information, for breach of contract, and breaches of the Consumer Law…

8    He deposed that, without access to any information held by ANZ, he and his wife were not in a position to assess whether there had been any breaches of their privacy (or associated contraventions of the law), and ANZ continued to refuse to give them the requisite information.

9    The prospective applicants made an application under r 7.23 on 14 October 2016. They sought several categories of documents relating to the conduct of ANZ, with respect to the bank accounts held by him and his wife, including the linking of those accounts to any accounts held by Mr Borg or his companies, communications about such linking, and any documents tending to reveal access by or on behalf of Mr Borg and his companies to the credit card statements.

10    After the first case management hearing, the matter was referred to mediation. It was also listed for hearing if the mediation failed. The prospective respondent made no submission that the matter should not be listed for trial.

11    After the mediation, ANZ filed an affidavit of Scott Graydon Clarke, the Dispute Resolution Manager for the prospective respondent. In that affidavit, Mr Clarke deposes to what the ANZ can produce in relation to each of the categories sought, and attaches those documents produced to his affidavit. He also deposes to what had happened to result in the prospective applicants’ credit card account statements being sent to Mr Borg and his companies, and how the accounts had been “linked” by ANZ. Essentially, an ANZ employee internally “linked” the Cobankara and Borg accounts, based on information that employee had accessed and then, when a request came through to update the Borg account addresses, this employee mistakenly updated the Cobankara account to that address as well. ANZ was unable to explain why copies of the prospective applicants’ credit card statements were addressed and sent to “Borg Corp PPTY Services CLG” between September 2013 and July 2014.

12    ANZ was able to depose, through Mr Clarke, that accordingly, Borg Corporation Property Services Pty Ltd (Borg Corporate) has never been granted access to the Cobankara account by ANZ, whether as a result of the linking of the Cobankara account to the Borg Corporate customer lending group or otherwise.

13    This affidavit, together with the production of documents addressing the categories sought in the application, resolved the application under r 7.23. However the parties were unable cooperatively to resolve the question of who should pay the costs of the application.

14    Mr and Mrs Cobankara sought costs on an indemnity basis. They invoked the approach set out by McHugh J in Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 at 624-625 and submitted the Court should assess the reasonableness of the parties’ respective conduct and costs should be awarded on the basis of that assessment. The approach discussed by McHugh J in Lai Qin is premised upon a settlement of the substantive dispute between the parties to a proceeding.

15    ANZ submitted pre-trial discovery applications were governed by distinct principles and the approach in Lai Qin was not appropriate. Relying on Cappuccio v Australia and New Zealand Banking Group Ltd [1999] FCA 1188, and SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271, ANZ submitted that orders in the following form should be made:

(a)    if the Prospective Applicants commence the foreshadowed substantive proceeding against the Prospective Respondent within 4 months of the date of these orders, the costs of the application be at the discretion of the Judge with carriage of the substantive proceeding; and

(b)    if the Prospective Applicants do not commence the foreshadowed substantive proceeding against the Prospective Respondent within 4 months of the date of these orders, the Prospective Applicants pay the Prospective Respondent’s costs and expenses of the application pursuant to Rule 7.29(b) of the Federal Court Rules 2011 (the Rules), to be taxed in default of agreement.

16    Given the way the parties agreed to resolve this interlocutory application, no substantive orders have been made. Rather, as I have noted, the evidence discloses the prospective respondent has produced documents to the prospective applicants which support the explanation of the course of events given by Mr Clarke in his affidavit.

Resolution

The relevant authorities

17    I accept the prospective respondent’s submission that the approach in Lai Qin is not appropriate because there are authorities suggesting a distinct approach to costs in pre-trial discovery applications. Indeed, there are a great many such authorities. The “contingent” approach for which the prospective respondent contends is but one of the approaches revealed by the authorities. The authorities, state and federal, suggest there is no uniform view on what that distinct approach should be. In ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304 (Objectivision), Perry J said (at [13]):

It has been doubted that there is as yet a “conventional approach” as to the manner in which the discretion as to costs and expenses is to be exercised in preliminary discovery applications: Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39; (2009) 182 FCR 124 (Apache) at 146–147 [90]–[91] (Flick J (in dissent but on issues not presently relevant)); J & A Vaughan Super Pty Ltd v Becton Property Group Ltd [2013] FCA 340 (Vaughan Super) at [16] (Kenny J). Any order for costs must necessarily be dictated by the facts and circumstances of the proceeding: Apache at 146 [89]; Vaughan Super at [16]. The decided cases are therefore illustrative only of the manner in which the discretion has been exercised in the circumstances of the particular case and provide guidance in that sense.

(Emphasis in original.)

18    I respectfully agree with her Honour.

19    In the ObjectiVision case, and with her Honour’s customary thoroughness, Perry J reviewed the relevant authorities. Having canvassed a number of authorities where doubts were expressed about the kind of “contingent” costs orders proposed in Cappuccio and SmithKline Beecham plc v Alphapharm Pty Ltd, her Honour said (at [21]-[23]):

[21] Similar doubts as to the desirability of making contingent costs orders were expressed by McDougall J in Steffen v ANZ Banking Group [2009] NSWSC 883 (Steffen) at [31] with respect to the principles applicable to an application for preliminary discovery under the Uniform Civil Procedure Rules 2005 (NSW). McDougall J considered that generally it is better to deal with costs on an application for preliminary discovery by making an order with immediate rather than contingent operation (at [33]). However, his Honour took a different view as to where the burden of costs should lie on a contested application for preliminary discovery, considering at [32] that: “where an application for preliminary discovery is contested in an adversarial fashion, then the ordinary consequences of that decision should follow unless some good reason is shown why they should not.” (following Simpson J in Airways Corp of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [2002] NSWSC 521 (Airways Corp of NZ)).

[22] Besanko J in Proctor v Kalivis (No 3) [2010] FCA 1194 (Proctor) adopted a similar approach to that in Steffen, stating at [17] that:

First, the jurisdiction to make an order for preliminary discovery is an extraordinary jurisdiction. There is a sense in which a respondent is entitled to remain passive until the applicant makes out a case for preliminary discovery: Glencore International AG v Selwyn Miners Limited (2005) 223 ALR 238 at 241 [15] per Lindgren J. Secondly, if the respondent does not take an adversarial approach to the application for preliminary discovery and in fact provides discovery then it may be appropriate to make the type of order sought by the respondents in this case [namely, a contingent costs order]. Thirdly, if the respondent does take an adversarial approach then it may be appropriate to order that it pay the costs caused by that adversarial approach: Re Steffen; Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520.

[23] I consider that there is considerable force in the approach adopted in Proctor and Steffen in contested cases such as the present. I also consider that the exceptional nature of the jurisdiction remains a matter to be taken into account in determining costs and may lead to a closer scrutiny than might otherwise be the case of the extent to which a successful prospective applicant should receive its costs: cf Hughes at 48,136 (Toohey J).

(Emphasis in original.)

20    Again, I respectfully agree with her Honour and cannot improve on her Honour’s analysis. Some additional scrutiny should be applied to whether, even if a prospective respondent has been “adversarial”, the usual orders as to costs following the event should be made, because of the extraordinary jurisdiction involved.

21    In Guest v Guest (No 2) [2016] VSC 76 at [19] (Guest), Mukhtar AsJ said:

It comes to this. On the current variable state of authority, it cannot be said that when an application for pre-action discovery is granted, then the usual rule is that costs of the application follow the event. So much depends on the case. The application is discrete, and depending on the circumstances, an applicant can and I would think ought be liable to pay a respondent’s costs of a successful application if there was a genuine dispute and the respondent did not act unreasonably in refusing to give discovery otherwise than by being ordered to do so by a court.

22    As Perry J noted in ObjectiVision at [39], there is a distinction between costs incurred on application for preliminary discovery and the costs of complying with an order for preliminary discovery. The same distinction was drawn by Mukhtar AsJ in Guest. I consider each aspect separately.

Costs of the interlocutory application

23    The account I have set out above indicates that the prospective respondent took something of an unreasonable approach to providing documentation to the prospective applicants. What the prospective applicants sought were documents relating to their own credit card accounts, and documents relating to the uncontested fact that some of their account details had been sent to a third party without their knowledge or consent, in circumstances where individuals associated with that third party were restrained by a court order from approaching or being in the vicinity of Mrs Cobankara. That is a somewhat unusual circumstance and a matter one might reasonably have expected the prospective respondent to take particular notice of in responding to the prospective applicants’ requests for information and explanation. If the prospective respondent had acted cooperatively, it could have explained the mistakes much earlier, and more informally, to the prospective applicants, thus removing the need for them to commence this proceeding because of an apprehension, in my opinion reasonably based, that such third parties had been given access to their private banking information.

24    Ultimately however, the prospective respondent took part in mediation and an agreed outcome was reached whereby it provided to the prospective applicants “the exact information sought by the application”. Nevertheless, the prospective respondent was content to have the matter listed for trial, signalling an intention to contest the application. In those circumstances, it would be incorrect to characterise the prospective respondent’s conduct as entirely unreasonable or entirely adversarial. It has features of both, but those features are ameliorated by the position it ultimately adopted.

25    For that reason, together with the extraordinary nature of the jurisdiction, I do not consider it is appropriate to adopt an approach to the Court’s costs discretion which is premised on costs following the event of discovery and production for inspection. A more nuanced exercise of the discretion better fits the justice of the case.

26    The prospective applicants had attempted by means other than litigation to ascertain whether their privacy rights (as they apprehended them) had been breached by the prospective respondent. The prospective respondent had been uncooperative. The prospective applicants were in that sense left with little choice but to use a compulsory process to ascertain whether there was a sufficient basis for them to be satisfied their legal rights (as they saw them) had been infringed. As matters turned out, the production and inspection of the documents concerned provided an explanation more consistent with human error than with any conscious interference with private information about the prospective applicants that was held by the prospective respondent. In that sense, the prospective applicants have secured something of a substantive outcome.

27    Accepting that the exercise of the costs discretion is a matter on which reasonable minds may differ, and taking into account the various matters set out in the authorities and the factual circumstances applicable in those authorities (none of which align closely to the current circumstances), my view of the circumstances is that the prospective respondent should pay 50% of the prospective applicants’ costs of the interlocutory application on a party/party basis, subject to the matter I deal with in [28] below.

Costs of providing discovery and inspection

28    In ObjectiVision, Perry J ordered the prospective applicant to pay the costs incurred by the prospective respondents in providing discovery and inspection, at least in part on the basis that it could not be said (by reference to the authorities her Honour had earlier set out and which I have extracted above) that those costs were incurred by reason of any adversarial approach adopted by the prospective respondents to the application for preliminary discovery. Her Honour did not consider the prospective respondents should have to await the possible outcome of proceedings (if any) instituted by the prospective applicant to be compensated for the costs of providing discovery and inspection.

29    In my opinion, there is a sound basis for such a distinction, because of the extraordinary nature of the jurisdiction to order preliminary discovery. In the present proceeding no orders were required to be made for preliminary discovery, and the prospective respondent provided documents outside the circumstances in which it would ordinarily have an obligation to do so. It has done so in a way which, as I apprehend the evidence, may mean the underlying concerns of the prospective applicants have been addressed, in the sense of it now being understood by the prospective applicants how some of their credit card statements came to be sent incorrectly to the address of individuals with whom they had a substantial dispute. I see no justification for the prospective respondent having to bear the costs of discovering the documents.

Conclusion

30    The parties’ submissions did not canvass all of the relevant authorities. The prospective applicants’ submissions canvassed none of the relevant authorities. The prospective respondent’s submissions canvassed some, but not Perry J’s decision, nor many of the cases to which her Honour referred. I do not consider either party should recover any costs in respect of the submissions provided to the Court: each party should bear its own costs of those submissions.

31    There will be orders as to costs in accordance with these reasons. The application has been resolved in substance, and the prospective applicants should be granted leave to discontinue the application, so as to finalise the proceeding.

Associate:

Dated:    24 April 2017