FEDERAL COURT OF AUSTRALIA

Baron v Commonwealth Bank of Australia Limited [2018] FCA 1384

ORDERS

THE COURT ORDERS THAT:

1.    Paragraph 24 of the statement of claim filed on 29 June 2018 be struck out.

2.    Leave be granted to the applicants to replead the allegations in respect of the alleged Risks Systems Deficiency Information referred to therein.

3.    The applicants pay the respondent’s costs of and incidental to the interlocutory application filed on 27 July 2018.

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    The respondent, Commonwealth Bank of Australia (CBA), moves to strike out para 24 of the statement of claim pursuant to r 16.21 of the Federal Court Rules 2011 (Cth) (the Rules). Alternatively, it seeks an order that the applicants, Philip Anthony Baron and Joanne Baron, provide further and better particulars of the material facts, matters or circumstances on which they rely in respect of the allegations made in that paragraph.

2    The proceeding is a representative proceeding commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the FCA) by the applicants on their own behalf, as trustees for the A S & M Superannuation Fund, and on behalf of persons, save for certain exceptions, who acquired an interest in CBA shares during the period 16 June 2014 and 1.00 pm on 3 August 2017 inclusive (referred to in the statement of claim as the Claim Period), who are alleged to have suffered loss and damage by reason of the conduct pleaded in the statement of claim, and who, at the commencement of the proceeding, had entered into a funding agreement with Therium Australia Ltd (the group members).

3    A similar application was made successfully by CBA in other representative proceedings commenced against it in this Court arising substantially out of the same factual background: Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Ltd VID 1085 of 2017 (the Zonia proceeding). I will not repeat that background in these reasons.

4    In the Zonia proceeding, I made an order that para 46 of the statement of claim filed therein be struck out, with leave to replead: Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited [2018] FCA 659 (the Zonia reasons). Paragraph 24 of the statement of claim filed in the present proceeding bears a striking resemblance to para 46 of the statement of claim filed in the Zonia proceeding. The applicants submit, however, that the particulars given with respect to para 24 of the statement of claim filed in the present proceeding are significantly different to the particulars given with respect to para 46 of the statement of claim filed in the Zonia proceeding and that, as a consequence, the strike out application discussed in the Zonia reasons is distinguishable from the present application.

5    At the hearing of the present application, the applicants stated their intention to amend the particulars to para 24. The proposed amendments do not impact on the deficiencies that CBA sees with the pleading. The present application proceeded as if the current pleading incorporates those amendments.

The statement of claim

6    The essence of the applicants’ claim is that CBA wrongly failed to disclose information to the market, in breach of its continuous disclosure obligations and given other representations it had made; that the applicants and group members acquired their CBA shares in a market which had not been given the information which CBA should have disclosed; and that when the market was properly informed, the price of CBA shares fell, causing loss and damage to the applicants and group members.

7    In its proposed form, para 24 reads:

24.    From a date presently unknown to the Applicants but no later than at least May 2012, until at least 3 August 2017, CBA’s systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk in relation to IDMs, and generally, were deficient (Risks Systems Deficiency Information).

Particulars

i)    The systems for assessing, monitoring and managing ML/TF Risk were deficient by reason of the matters the subject of each and any combination of the following, for the periods referred to in the following:

(A)    the TTR Information – for a period presently unknown to the Applicants but at least from November 2012 to September 2015;

(B)     the SMR Information – for a period presently unknown to the Applicants but at least from October 2012 to September 2015;

(C)    the Absence of Risk Assessment Information – from May 2012 to July 2015; and

(D)     the Account Monitoring Failure Information – from at least 20 October 2012 to a date presently unknown to the Applicants.

ii)     Further or alternatively, the systems for assessing, monitoring and managing ML/TF Risk were deficient by reason of:

(A)     the ‘systems error’ or ‘computer coding error’ referred to in the particulars to paragraph 20 above, which affected transactions on hundreds of thousands of accounts (Affected Accounts) from at least 20 October 2012 but was not identified until 16 June 2014. This error arose in the process of merging data from two systems, with the result that the ‘account type description’ field (which indicated whether the account was a personal or commercial account) was not populated with CBA’s Financial Crime Platform and so account-level automated transaction monitoring rules did not operate as intended in respect of the Affected Accounts. The Applicants refer to inter alia the Agreed Facts in AUSTRAC Proceeding, paragraph 51;

(B)     further or alternatively, the ‘systems error’ referred to in paragraph 16(a)(v) and 16(b)(v) above, which caused tens of thousands of TTRs not to be given to AUSTRAC on time from around November 2012 but was not identified until brought to CBA’s attention by AUSTRAC in the second half of 2015. This systems error was the result of CBA’s TTR process not being updated and configured to automatically search for a transaction code used to identify deposits involving cash made through IDMs for the purposes of TTR reporting to AUSTRAC. The Applicants refer to inter alia the Agreed Facts in AUSTRAC Proceeding, paragraphs 43 to 44;

(C)     further or alternatively, the failure of (alternatively, lack of) backup or failsafe systems that would have permitted the systems errors in (A) and/or (B) to have been detected and remedied earlier than they were.

iii)     Further or alternatively, the systems for reporting suspected money laundering and terrorism financing to authorities were also deficient in that:

(A)     CBA adopted a policy of not giving SMRs to AUSTRAC pursuant to s 41 of the AML/CTF Act if a report had been given for the customer in question within the previous three months. Such a policy meant that where a SMR was given for the customer, then no further SMR would be given for that customer for the following three month period regardless of the transactions undertaken by that customer during that period. CBA ought to have submitted SMRs on each occasion when further suspicious transactions were identified regardless of whether a report had been given for the customer in question within the previous three months. The Applicants refer to inter alia the Agreed Facts in AUSTRAC Proceeding, paragraph 55(a);

(B)     CBA’s systems for generating and reviewing transaction monitoring alerts and reviewing concerns raised by CBA employees about suspicious transactions were insufficient to mitigate or manage CBA’s ML/TF Risk in accordance with the AML/CTF Act and AML/CTF Rules, since:

    a.    insufficient automated transaction monitoring alerts were generated in a period where there were transactions which were unusually large, complex, had an unusual pattern, or had no apparent economic or visible lawful purpose;

b.    a review of the customer or account, where an alert had been generated, did not occur quickly enough once that alert had been triggered;

c.    insufficient consideration was given to whether CBA should have terminated the customer relationship having regard to ML/TF Risk posed by the customer;

d.    CBA did not otherwise take enhanced customer due diligence measures appropriate to mitigate or manage its ML/TF Risk in the circumstances in accordance with the AML/CTF Rules.

The Applicants refer to inter alia the Agreed Facts in the AUSTRAC Proceeding, paragraphs 58 and 64(e);

(C)     where CBA decided to terminate a customer’s account for suspected money laundering or terrorism financing, CBA did not terminate the account immediately but gave the customer 30 days' notice and permitted ongoing transactions, including cash deposits and international transfers, on the account in the meantime. That enabled the customer to undertake further transactions which could be associated with suspected money laundering and terrorism financing during the notice period. CBA ought to have terminated the account or restricted transactions on the account immediately;

(D)     CBA’s systems for mitigating and managing the risk that its services (including IDMs) might involve or facilitate money laundering or financing of terrorism pursuant to s 36 of the AML/CTF Act were inadequate, in that in circumstances where CBA had identified a risk that a particular account was being used for money laundering or terrorism financing, CBA’s system did not ensure that CBA took timely steps to verify the identity of the customer, verify whether the customer had a legitimate reason for depositing cash amounts or transferring such deposits out of the CBA, restrict transactions on the account, or terminate the account. Where CBA had identified such a risk, CBA’s system ought to have done each of these things.

iv)     Further or alternatively, on 69 occasions, CBA did not submit SMRs, within the required time frame, in relation to instances of suspicious account activity indicative of possible money laundering, dealing in proceeds of crime or otherwise understood to be relevant to a criminal investigation, in circumstances where CBA had received requests from law enforcement for account details in the context of a criminal investigation. In 50 of these cases, CBA did not submit SMRs to AUSTRAC within the time frame stipulated in s 41(2)(a) although it subsequently did so. In the remaining 19 cases, CBA did not submit SMRs to AUSTRAC at all. This was due to a misapprehension about the proper treatment of information received from law enforcement: Agreed Facts in AUSTRAC Proceeding, paragraph 55(b). CBA ought to have appreciated that it still needed to submit SMRs, within the required timeframe, in circumstances where it had received requests from law enforcement for account details in the context of a criminal investigation, and had systems in place which provided for that to occur.

v)     Further or alternatively, on 29 occasions, CBA did not submit SMRs, within the required time frame, in relation to suspicions that account holders were not the people they claimed to be, in circumstances where 29 accounts were opened by two individuals within a criminal syndicate using false identification, and where CBA had received information from law enforcement to this effect with the customers being listed across two email notifications to CBA from the Australian Federal Police. This was due to a misapprehension that information of this nature derived from law enforcement did not need to be reported to AUSTRAC: Agreed Facts in AUSTRAC Proceeding, paragraph 55(c). CBA ought to have appreciated that it still needed to submit SMRs, within the required timeframe, in circumstances described above, and had systems in place which provided for that to occur.

vi)    Further or alternatively, according to the Australian Prudential Regulation Authority report ‘Prudential Inquiry into the Commonwealth Bank of Australia’ dated April 2018, the systems for assessing, monitoring and managing ML/TF Risk were deficient by reason of at least the following matters:

(A)     CBA’s ML/TF Risk systems were the subject of ‘red’ audit reports in 2013, 2015 and September 2016, which identified weaknesses in ML/TF Risk management and processes, and some such issues arose repeatedly: pp 15 – 16;

(B)     The later reports identified that ML/TF Risks management and process issues identified in earlier reports had not been remediated or addressed, and where they had been, had been reopened due to inadequacies in remediation. Successive remediation programs were slow to address underlying failings in the ML/TF Risk control framework. These remediation failures arose due to lack of ownership in CBA of ML/TF Risk management processes and inadequate implementation of action plans: pp 15 – 16, 23;

(C)     An internal audit report in December 2014 showed that five ML/TF Risk control weaknesses had been identified as requiring remediation, and four of those issues had been closed without fully addressing the risk: p 41;

(D)     There was a lack of accountability by heads of business units for the ML/TF Risk generated by the products and services they offered: p 60.

vii)     The Applicants also refer to and rely upon CBA’s Concise Response in AUSTRAC Proceeding, in particular paragraphs 13 to 18 and 26 to 30.

viii)     Further particulars may be provided following discovery and other interlocutory procedures.

8    In para 24:

(a)    the expression ML/TF Risk means the risk that a reporting entity, such as CBA, may reasonably face that the provision by it of designated services might (whether inadvertently or otherwise) involve or facilitate money laundering or the financing of terrorism, for the purpose of the entity’s anti-money laundering and counter terrorism financing program required to be adopted and maintained under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the AML/CTF Act) and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (Cth);

(b)    the acronym IDMs means intelligent deposit machines; and

(c)    the word “generally” qualifies CBA’s “systems”, not their alleged “deficiencies”.

9    With regard to particular (i):

(a)    the expression TTR Information is defined and described in para 16 of the statement of claim (in general terms, it is information concerning the fact that CBA failed to give certain threshold transaction reports (TTRs) on time to the Australian Transaction Reports and Analysis Centre (AUSTRAC) in relation to certain transactions processed through its IDMs);

(b)    the expression SMR Information is defined and described in para 22 of the statement of claim (in general terms, it is information concerning the fact that CBA failed to give certain suspicious matter reports (SMRs) to AUSTRAC, or gave late or incomplete SMRs);

(c)    the expression Absence of Risk Information is defined and described in para 18 of the statement of claim (in general terms, it is information concerning the fact that, prior to the roll-out of its IDMs in May 2012 and up to July 2015, CBA failed to carry out an assessment of ML/TF Risk in relation to the provision of designated services through its IDMs); and

(d)    the expression Account Monitoring Failure Information is defined and described in para 20 of the statement of claim (in general terms, it is information concerning the fact that by June 2014, CBA had failed to conduct account level monitoring with respect to certain customer accounts for a significant period of time).

Thus, an understanding of particular (i) requires the reader to have regard to the definitions and descriptions in other paragraphs of the statement of claim.

10    I also observe that the particulars refer to other sources of information which are incorporated into the particulars, namely the Statement of Agreed Facts and Admissions filed in proceeding NSD1305/2017 (Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Commonwealth Bank of Australia Limited) (see particulars (ii) to (v) which describe the statement as the Agreed Facts—although I hasten to add that they are not facts that are agreed in this proceeding) and the report of the Australian Prudential Regulatory Authority entitled Prudential Inquiry into the Commonwealth Bank of Australia, which is dated April 2018 (see particular (vi)) (the APRA Report).

11    Paragraph 25 of the statement of claim pleads that by no later than at least 16 June 2014, or alternatively 24 September 2015, CBA was aware (within the meaning of ASX Listing Rule 19.12) of the Risks Systems Deficiency Information pleaded in para 24.

12    Paragraph 26 of the statement of claim introduces the expression Potential Penalty Information. In general terms, this refers to the fact that, by no later than at least 16 June 2014 or 24 September 2015, CBA was exposed to the risk of enforcement action by AUSTRAC in respect of non-compliance with the AML/CTF Act, which could result in CBA being ordered to pay a substantial civil penalty. That risk has now crystallised and resulted in the payment of such a penalty: Chief Executive Officer of the Australian Transaction Reports and Analysis Centre v Commonwealth Bank of Australia Limited [2018] FCA 930. The allegation in para 26 is particularised by reference to, inter alia, the Risks Systems Deficiency Information as an aspect of CBA’s non-compliance with the AML/CTF Act.

13    The allegation concerning the Risk Systems Deficiency Information pleaded in para 24 is repeated and relied on in other paragraphs of the statement of claim. See the allegations that:

(a)    a reasonable person would expect the Risks Systems Deficiency Information to have a material effect on the price or value of CBA shares within the meaning of ASX Listing Rule 3.1 and s 674(2)(c)(ii) of the Corporations Act 2001 (Cth) (the Corporations Act): para 44 of the statement of claim;

(b)    CBA was obliged by ASX Listing Rule 3.1 and s 674(2) of the Corporations Act to immediately notify the ASX of the Risks Systems Deficiency Information on and from the time it became aware of it: para 45 of the statement of claim;

(c)    CBA did not notify the ASX of the Risks Systems Deficiency Information at any time during the Claim Period: para 46 of the statement of claim;

(d)    CBA thereby contravened ASX Listing Rule 3.1 and s 674(2) of the Corporations Act: para 47 of the statement of claim; and

(e)    the failure to disclose the information caused loss to the applicants and group members: Part G of the statement of claim.

14    CBA submits, and I accept, that, in a “non-disclosure case”, such as the present, it is critically important that the pleading identify with appropriate precision the information which allegedly ought to have been disclosed. It is the starting point for determining whether, in light of its nature and character, each element was information that a reasonable person would expect to have a material effect on the price or value of CBA shares, such that CBA came under an obligation to disclose that information to the market: see also the Zonia reasons at [24].

CBA’s submissions

15    CBA submits, firstly, that it is not sufficient for the applicants to repeat the substance of para 46 of the statement of claim in the Zonia proceeding (which was found to be deficient as a matter of pleading) and set out further particulars in order to support the allegation made. Whilst acknowledging that the strictness with which the rules of pleading will be applied depends on the case at hand, CBA stresses the critical importance of the statement of claim pleading material allegations of fact and identifying with appropriate precision the information which, the applicants allege, CBA should have disclosed to the market. In this regard, CBA submits that it should not be exposed to “an ever-shifting formulation of the information” by means of amendments to particulars provided to a generalised, overarching allegation such as the allegation made in para 24. As to this last matter, I note that para (viii) of the particulars to para 24 presages the possibility of yet further amendments.

16    Secondly, CBA submits that para 24 in its proposed form does not provide adequate information as to the alleged deficiencies in CBA’s systems. Indeed, CBA submits that the content of the disclosure which, it is alleged, it ought to have made, is far from clear. CBA points to various matters:

(a)    Noting that particulars (ii) to (vi) are each prefaced by the words “further or alternatively”, CBA submits that it is not clear whether the Risks Systems Deficiency Information which, it is alleged, ought to have been disclosed is the generalised statement of the information in para 24 that “CBA’s systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk in relation to IDMs, and generally, were deficient” (the generalised statement), or whether CBA was obliged to disclose all or some combination of the more specific information in particulars (i) to (vi) of para 24 (the specific information) or, even further, whether CBA was obliged to disclose the generalised statement together with all or some of the specific information.

(b)     CBA submits that this lack of clarity is compounded by the fact that the various time periods referred to in the particulars are not coincident with the time period applicable to the generalised statement, which is defined by deficiencies in CBA’s systems present in the period “no later than at least May 2012, until at least 3 August 2017”. For example, although the generalised statement says that the systems were deficient no later than “at least May 2012”, particulars (i)(A), (B) and (D) refer to periods that commence after May 2012. The lack of clarity is not answered by particular (i)(C) (which refers to a period commencing from May 2012) because particular (i) relies on “each and any combination of” particulars (i)(A), (B), (C) or (D). Further, none of the particularised time periods extends to 3 August 2017, which is the endpoint stated in the generalised statement. What deficiencies, therefore, constitute the content of the Risks Systems Deficiency Information in the period(s) after the end of each individual period identified in the particulars up to 3 August 2017?

(c)    CBA submits that particular (i) is no more than a repetition of each species of information pleaded in other paragraphs of the statement of claim, without identifying how or why CBA’s systems in relation to IDMs or “generally” were deficient. In other words, how is it said that CBA’s systems for assessing, monitoring and managing ML/TF Risk or its systems for reporting transactions that might be affected by ML/TF Risk, should have operated; how did those various systems in fact operate; and how or why was there a “deficiency”. As stated at [32] of the Zonia reasons, the pleading of these matters is critical to determining whether there was a “deficiency”; whether CBA was aware (in the relevant sense) of the “deficiency”; and, if so, whether that information was such that a reasonable person would expect it to have a material effect on the price or value of CBA shares.

(d)    CBA submits that particular (vi) is no more than an ambiguous cross-reference to conclusions in a report which, expressed as they are, suffer the same defect discussed in para (c) above. The fact that, at the present time, the applicants do not know the details of each of the matters referred to in particulars (vi)(A), (B) and (C) does not excuse the deficiencies in the particulars given.

17    Thirdly, CBA submits that para 24 of the statement of claim distinguishes between CBA’s systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk in relation to IDMs, on the one hand, and CBA’s systems generally, on the other hand. CBA submits that the particulars did not distinguish between the two broad systems, with the consequence that the precise nature of the allegations made by the applicants is “hidden”.

18    Fourthly, CBA submits that the “rolled-up” way in which para 24 is pleaded exacerbates the paragraph’s embarrassing nature.

19    In oral argument, CBA drew attention to a further “timing” anomaly raised by para 24 which impacts on the content of the Risks Systems Deficiency Information. Particular (iv) of para 24 refers to 69 occasions on which it is alleged that CBA did not submit SMRs within the required timeframe to AUSTRAC in respect of instances of suspicious account activity. Particular (iv) refers to para 55(b) of the Agreed Facts, which identifies these occasions as having occurred between 28 August 2012 and 7 June 2017. Paragraph 25 of the statement of claim (which, as I have noted, pleads CBA’s “awareness” of the Risks Systems Deficiency Information) alleges that all this information was known to CBA no later than “at least 16 June 2014, or alternatively 24 September 2015”. As CBA points out, there is an obvious incongruity between para 24 and para 25: how can it be said that CBA was aware of this aspect of the Risks Systems Deficiency Information by no later than 16 June 2014 or 24 September 2015, when, according to para 24 of the statement of claim, the information comprises events that had not even taken place by those times? CBA also drew attention to the fact that it is unclear whether the applicants are alleging that the information based on the 69 occasions should have been disclosed on or at the 69th occasion, or whether each occasion or some subset of occasions should have been disclosed when CBA became aware that it or they had taken place.

Analysis

20    CBA’s submissions expose a number of shortcomings in the proposed (and present) pleading of para 24 of the statement of claim. I accept that the identification of the Risks Systems Deficiency Information is unclear and that the pleading of para 24 causes embarrassment. This problem results from a combination of pleading techniques used by the applicants:

(a)    Particulars are used instead of pleading material allegations of fact. One consequence is that it is unclear whether the Risks Systems Deficiency Information is intended to be defined by the generalised statement in para 24 (as the use of the bolded expression in para 24 would suggest) or by the specific information given in the particulars. What, in precise terms, should CBA have disclosed—the generalised statement or the specific information?

(b)    If the latter, the particulars are a rolled-up narrative of various pieces of information and explanations. What pieces of information should have been disclosed? Further, when the permutations of the narrative are teased out, inconsistencies and gaps (of the kind CBA has identified) are revealed, leading to furthers confusion and uncertainty.

(c)    This is exacerbated by the applicants’ particular use of the expression “further or alternatively” in relation to particulars (ii) to (vi). In oral argument, the applicants accepted, for example, that there was a substantial overlap between the content of particulars (i) and (ii). If so, to what extent is particular (ii) “further” information, or how and to what extent does it stand as “alternative” information, compared to the information in particular (i)? Does particular (ii) stand independently of particular (i) or is it an elaboration of particular (i)? In considering these questions, the reader is left to carry out his or her own comparative analysis of the respective paragraphs in an attempt to divine the difference (if as a matter of substance there be a difference) between the two sets of particulars. The same criticism can be levelled at particulars (iii), (iv) and (v) (dealing with SMRs) when compared with particular (i). The result is that the content of the Risks Systems Deficiency Information is indeterminate.

21    The inability of para 24 to state precisely and unambiguously the content of the Risks Systems Deficiency Information (as opposed to information of varying scope and content, which also seems to vary over time) has flow-on effects and raises further confusion and uncertainty. When should CBA have been aware of the precise information in contest? At that time, would a reasonable person have expected that information to have a material effect on the price or value of CBA shares, such that CBA was under a legal obligation to disclose it? In its present and proposed forms, para 24 does not allow those questions to be answered. It glides over the inconsistencies and gaps which CBA has identified. It fails to achieve the objects stated at [14] above.

22    Particular (vi) is obscure. It alleges deficiencies without identifying them. It relies on a series of apparent criticisms made in the APRA Report concerning “weaknesses” in CBA’s ML/TF Risk management and processes, “issues” which CBA had not “remediated or addressed”, “failings” which CBA had been slow to address, a “lack of ownership” by CBA of its ML/TF Risk management and processes, “inadequate implementation of action plans”, and a “lack of accountability” by heads of business units, amongst other things. Once again, what, in precise terms, should CBA have disclosed? Particular (vi) is also obscure because it is not clear how or to what extent it relates to deficiencies otherwise described in the applicants’ narrative given in particulars (i) to (v). The applicants frankly concede that, at the present time, they do not know the factual bases for the conclusions that APRA has expressed and cannot meaningfully elaborate on particular (vi). They do not know, for example, whether the “weaknesses”, “issues” and “failings” comprise or include information that a reasonable person would expect to have a material effect on the price or value of CBA shares. Their hope is that the Court will allow para 24 and particular (vi) to stand and then, on their application, make an order for discovery against CBA on these matters to elicit information that might assist their case. Armed with the results of discovery, they then hope to remedy the present deficiencies in particular (vi). In this connection, the applicants rely on certain observations made by Moshinsky J in Sadie Ville Pty Ltd v Deloitte Touch Tohmatsu [2017] FCA 1202; (2017) 123 ACSR 223 (Sadie Ville) at [64], [66] and [73] to the effect that limited particulars may be supplemented after discovery has taken place and that, from a case management perspective, this approach would be consistent with the overarching purpose set out in s 37M of the FCA.

23    This is not an acceptable response to the obvious shortcomings of this aspect of the pleading of para 24. The inescapable problem is that particular (vi) does not provide a clear and unambiguous identification of the information that constitutes the Risks Systems Deficiency Information. Such identification is critical if the applicants are to rely on this species of information in their claim. In Sadie Ville, Moshinsky J concluded (at [65]) that the pleaded material allegations of fact in the case before him were expressed in clear and logical terms, and set out the elements that needed to be established in order to make good the contraventions that had been alleged. The same cannot be said of the applicants’ pleading of the Risks Systems Deficiency Information. Further, recourse to s 37M of the FCA does not assist the applicants. In Sadie Ville, Moshinsky J was satisfied that, even though further particulars of the material allegations of fact might need to be provided in due course, the pleading was, nonetheless, expressed in terms that were conducive to the orderly conduct of the proceeding, including its pre-trial processes. For the reasons I have expressed, I do not have the same satisfaction with para 24 of the statement of claim.

24    I should add that I express no view on the availability, still less on the scope, of discovery that might be available to the applicants in the present case.

25    Finally, I do not accept CBA’s submission recorded at [17] above, to the extent that it construes para 24 as distinguishing between its systems in relation to IDMs (limited to systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk) and its systems “generally” (not limited to systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk). I construe para 24 as referring to CBA’s systems for assessing, monitoring and managing ML/TF Risk and reporting transactions which could be affected by ML/TF Risk in relation to, firstly, IDMs and, secondly, “generally”. I do accept that, if the applicants wish to make this division between CBA’s systems, they must make clear the content of the Risks Systems Deficiency Information as it relates to IDMs, and as it relates to CBA’s systems generally.

Conclusion and disposition

26    Paragraph 24 of the statement of claim should be struck out with leave given to the applicants to replead. I am not satisfied that the deficiencies can be overcome by requiring the applicants to provide further particulars of their allegations.

27    The applicants should pay CBA’s costs.

Associate:

Dated:    7 September 2018