FEDERAL COURT OF AUSTRALIA

Kemp v Westpac Banking Corporation (No 2) [2020] FCA 1392

ORDERS

THE COURT ORDERS THAT:

Discovery

1.    The parties shall comply with the electronic document exchange protocol in Annexure A for the purposes of exchanging documents used in the proceeding, including by way of discovery.

2.    On or before 13 November 2020, the applicant is to give discovery of the categories of documents set out in Annexure B, together with a list of documents verified in accordance with r 20.17 of the Federal Court Rules 2011 (Cth) (the Rules).

3.    The respondents are to give discovery of the categories of documents specified in Annexure C together with a list of documents verified in accordance with r 20.17 of the Rules, in tranches on the following dates:

(a)    23 October 2020;

(b)    13 November 2020;

(c)    18 December 2020; and

(d)    12 February 2021.

Opt Out

4.    Pursuant to ss 33J and 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act), 4.00 pm AEDT on 27 November 2020 be fixed as the date by which a group member may opt out of this proceeding (Opt Out Deadline).

5.    Pursuant to ss 33X and 33Y of the Act, the terms of the opt out notice set out in Annexure D (the Notice) to these Orders are approved.

6.    Pursuant to s 33J of the Act, any group member who wishes to opt out of this proceeding must, before the Opt Out Deadline, deliver a Notice of Opting Out in the form of Schedule A to Annexure D to these orders to the Victorian District Registry of the Court.

7.    The Notice (and the form in Schedule A to the Notice) may be amended by the solicitors for the applicant before they are published in order to correct any postal, website or email address or telephone number.

8.    If, on or before the Opt Out Deadline, the solicitors for any party receive a notice purporting to be an opt out notice referable to this proceeding, the solicitors are to file such notice in the Victorian District Registry of the Court within 14 days of receipt with a notation specifying the date it was received and the notice shall be treated as an opt out notice received by the Court at the time when it was received by the solicitors.

9.    The solicitors for the parties have leave to inspect the Court file and to copy any opt out notices filed by group members.

10.    Pursuant to ss 33Y and 33ZF of the Act, on or before 17 October 2020:

(a)    the first respondent shall provide a third party mailing house to be agreed between the parties the name, email address, postal address, name of the policy purchased, date of the policy purchased and the date of the cancellation of the policy purchased (if applicable) of any persons known to it who:

(i)    purchased a Westpac Credit Card Protection, Westpac Flexi Loan Protection or Westpac Personal Loan Protection policy, on or after 1 January 2010 (a Westpac CCI Policy);

(ii)    has paid a premium for a Westpac CCI Policy (Premium Paid); and

(iii)    has not been refunded in full for the Premium Paid or has not successfully claimed more than the Premium Paid amount,

     (Potential Class Members);

(b)    the third-party mailing house shall provide the Notice to Potential Class Members:

(i)    by email from a ‘no-reply’ email address to be agreed between the parties, where an email address is available to the first respondent; or

(ii)    where no email address is available to the first respondent, by prepaid ordinary post at the address recorded by the first respondent for that person; and

(iii)    should the third-party mailing house receive notice of a delivery failure in relation to any email sent, by prepaid ordinary post to that person at the address recorded by the first respondent for that person, within two business days of receiving that delivery failure notice;

(c)    the applicant shall cause the Notice to be displayed on the website of the applicant’s solicitors until the Opt Out Deadline.

11.    The cost of the third-party mailing house engaged to undertake the distribution of the Notice under Order 10 is to be paid in the first instance by the applicant on the basis that those costs will be costs in the proceeding.

Other

12.    Costs otherwise be reserved.

13.    The proceedings be listed for a further case management hearing at 10.15 am on 26 February 2021.

14.    There is liberty to apply on 3 days' notice.

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

ANNEXURE A

Protocol for Electronic Exchange of Discovered Documents

[The Order entered is available on the Commonwealth Courts Portal, which attaches the Protocol.]

ANNEXURE B

Terms defined in the Statement of Claim have the same meaning when used in these categories.

ANNEXURE C

Terms defined in the Statement of Claim have the same meaning when used in these categories.

Unless otherwise specified, each of the categories is confined to the period from 1 January 2010 to 28 February 2020.

ANNEXURE D

FEDERAL COURT OF AUSTRALIA NOTICE

WESTPAC CONSUMER CREDIT INSURANCE CLASS ACTION (VID134/2020)

                                                                        THIS NOTICE IS IMPORTANT. IT IS NOT A SCAM

PLEASE READ IT CAREFULLY, AS IT MAY AFFECT YOUR LEGAL RIGHTS

                                                                      WHAT IS THIS NOTICE?

The purpose of this notice is to inform you of a class action that has been commenced in the Federal Court of Australia against Westpac Banking Corporation, Westpac General Insurance Limited and Westpac Life Insurance Services Limited (collectively referred to as Westpac).

The action relates to Westpac's sale of three types of ‘consumer credit insurance’ policies, called Credit Card Repayment Protection, Flexi Loan Repayment Protection and Personal Loan Protection insurance (referred to as the Policies). The class action seeks compensation for persons who were sold the Policies and who have paid premiums for the Policies (referred to as Class Members).

This Notice has been sent in accordance with orders made by the Federal Court of Australia on 25 September 2020.

                                                                    WHY AM I GETTING THIS NOTICE?

Westpac’s records show that you purchased and paid premiums for an insurance policy relevant to this class action, as follows:

          Therefore you may be a Class Member in the Westpac CCI Class Action

If you are a Class Member, you have two options (set out in more detail in Section 4 below):

1.    Remain a Class Member, in which case you do not need to do anything in relation to this Notice. You will be eligible to get any compensation or benefit, and will also be bound by the outcome in the class action.

You can also register your interest and receive updates on the progress of the class action by visiting [hyperlink]. If you register, you will also be directly notified of any settlement or judgment using the contact details you provide.

2.    Opt out of the class action before the deadline of 4.00pm AEDT on 27 November 2020 in which case you will remove yourself as a Class Member and lose the right to get compensation or benefit through the class action (but will retain your right to pursue compensation on your own).

You should read this Notice carefully, including the further information regarding your options at Section 4 below.

                                                               INFORMATION ABOUT THE CLASS ACTION

1.    WHAT IS A CLASS ACTION?

A class action is a type of legal proceeding in which the claims of a group of persons (referred to as Class Members) are brought in a single proceeding.

A class action is commenced by one or more persons (the Applicant/s) on behalf of the Class Members. Unless a Class Member opts out (as explained in section 4 below), they are automatically covered by the class action even if they did not take any active steps to join it before it was commenced.

2.    WHAT IS THE WESTPAC CCI CLASS ACTION?

The Westpac CCI Class Action was commenced by the Applicant on 28 February 2020 and is being conducted by Slater and Gordon Lawyers.

The class action relates to the sale of three insurance products, which were sold alongside Westpac credit cards, flexi loans and personal loans:

a.    Westpac Credit Card Repayment Cover;

b.    Westpac Flexi Loan Repayment Cover; and

c.    Westpac Personal Loan Protection,

(Westpac CCI).

    The Applicant alleges that Westpac:

a.    engaged in misleading or deceptive conduct (for example, by failing to inform some Class Members that the Policies were optional);

b.    caused Class Members to make payments as a result of mistaken beliefs of some class members that the Policies were not optional or provided value;

c.    engaged in unconscionable conduct by, among other things, using 'unfair tactics' in arranging the issue of the Policies and not giving Class Members an adequate opportunity to consider whether the Policies were suitable for them; and

d.    unlawfully provided personal advice to some Class Members who purchased the Policies in a bank branch or over the telephone after 28 February 2014.

Westpac denies the allegations and are defending the claims.

3.    AM I A CLASS MEMBER?

You are a Class Member if:

a.    at any time between 1 January 2010 and 30 June 2019, you were issued with a Westpac CCI policy; and

b.    you have suffered loss or damage because of the alleged conduct of Westpac (for example, by paying more in premiums and interest than any amount you received in relation to a claim or remediation with respect to that policy).

If you are a Class Member and you acquired your CCI policy or first paid a premium before 28 February 2014, Westpac’s position is that it is too late for you to bring your claims in this proceeding. The Applicant disagrees with this position. If the court agrees with Westpac’s position, any such claims will fail.

                                                                                   YOUR OPTIONS

4.    WHAT ARE MY OPTIONS?

If you are a Class Member, you have two options, which are set out in detail below.

                                                                        COSTS AND RELIEF SOUGHT

5.    WILL I BE LIABLE TO PAY LEGAL COSTS IF I REMAIN A CLASS MEMBER?

Class Members in the Westpac CCI Class Action are not, and will not be, liable for any “out of pocket” legal costs by remaining in the class action. The costs of running the Westpac CCI Class Action are being covered by Slater and Gordon on a “No Win, No Fee” basis.

If the Westpac CCI Class Action is successful, the Court will be asked to approve the Applicant’s reasonable legal costs and those approved costs may be deducted on a pro rata basis from any settlement or judgment obtained.

The Applicant seeks a number of types of relief on behalf of Class Members, including damages to compensate each Class Member and/or the return to each Class Member of the premiums they each paid under the Policies.

If the action succeeds, the Court may be asked to make declarations that some Policies are void, in addition to monetary relief. Your consent will be requested before any declaration that your Policy is void is made.

                                                                   IMPORTANT MATTERS TO NOTE

7.    YOU SHOULD NOTE THAT:

Firstly, this is not a scam. You can check (and obtain copies of) any relevant documents by visiting Slater and Gordon’s website [hyperlink] or inspecting them at one of the offices of Slater and Gordon.

Secondly, if you wish to remain a Class Member, you do not need to do anything in relation to this Notice. Alternatively, you can actively register your interest in the Westpac CCI Class Action on Slater and Gordon’s website at [hyperlink].

Thirdly, if you wish to opt out, you must complete the ‘Opt Out Notice’ form annexed to this Notice at Schedule A and return it directly to the Victorian Registry of the Federal Court of Australia before the Opt Out Deadline, i.e. by no later than 4pm on 27 November 2020.

SCHEDULE A

Form 21 Rule 9.34

                                                                             OPT OUT NOTICE 

VID    134 of 2020

Federal Court of Australia

District Registry: Victoria

Division: Commercial and Corporations NPA

Regulator and Consumer Protection Sub-area

Roger Kemp

Applicant

Westpac Banking Corporation ACN 007 457 141 and others named in the Schedule

Respondents

To:    The Registrar

Federal Court of Australia

Victoria District Registry

Owen Dixon Commonwealth Law Courts Building

305 William Street

Melbourne VIC 3000

…………………..…………………….(print name of class member), a class member in this class action, gives notice under section 33J of the Federal Court of Australia Act 1976 that they are opting out of the class action.

Date: …………………………..

Signed by: …………………………………….

Class Member/Lawyer for the Class Member (circle as applicable)

Please complete the information on the following page

Class member details

Telephone:    ………………………………………………………

Email:    ………………………………………………………

Address:    ………………………………………………………

If you are signing as the solicitor or representative of the class member:

Name:    .……………………………………………………..

Capacity:     ………………………………………………………

Telephone:     ………………………………………………………

Email:    ……………………………………………………….

Address:    ……………………………………………………….

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    The proceeding was commenced on 28 February 2020. I made timetabling orders for the completion of pleadings and initial discovery on 3 April 2020: Kemp v Westpac Banking Corporation [2020] FCA 437.

2    The parties appeared before me on 7 August 2020 at a case management hearing to consider the next steps to be taken in the proceeding, including orders for further discovery and opt out procedures. In advance of the case management hearing, I received affidavits filed on behalf of both parties and extensive written submissions. The parties’ positions on certain issues diverged substantially. During the hearing, I made rulings on several of the issues that had arisen. I then asked the parties to formulate agreed orders on the basis of the rulings I had given but with the proviso that, if an issue arose that was not contemplated by the rulings made, the parties could file a short submission to address it. I made the following orders:

(a)    By 4:00 pm on Friday 28 August 2020, the parties file any proposed consent orders in relation to opt out notices and discovery or, in the absence of agreement, each party file their proposed orders together with a written submission of no more than 10 pages.

(b)    Any dispute in relation to opt out notices or discovery will be determined on the papers unless any party indicates in their written submissions that they seek an opportunity to make further oral submissions.

3    Unfortunately, the parties were still unable to agree orders on these issues. On 28 August 2020, each of the parties filed further written submissions. The applicant also filed a further affidavit and sought an opportunity to make further oral submissions. The parties appeared before me on 25 September 2020 for further argument. At the conclusion of the hearing, I made orders in relation to discovery and opt out. These are my reasons in relation to the matters in dispute.

Context

4    Section 37M(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides that the overarching purpose of the civil practice and procedure provisions (principally the Federal Court Rules 2011 (Cth) (Rules)) is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37M(2) provides that, without limiting subsection (1), the overarching purpose includes the just determination of all proceedings before the Court and the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. The proper application of those principles requires attention to be given to the nature of the proceeding before the Court and the fairness and proportionality of the legal cost burden that may be imposed on litigants by reason of procedural orders that are made.

5    This is a representative proceeding brought under Part IVA of the FCA Act against Westpac Banking Corporation and two other related companies, Westpac General Insurance Limited and Westpac Life Insurance Services Limited (which I will refer to collectively as Westpac unless it is necessary to distinguish between the entities) in relation to certain consumer credit insurance policies issued to Westpac’s customers between 1 January 2010 and 30 June 2019 (relevant period).

6    The representative proceeding is what is colloquially referred to as an “open” class action. The applicant was a customer of Westpac and alleges that he acquired one of the consumer credit insurance policies issued by Westpac. He brings the proceeding on his own behalf and on behalf of all other persons who acquired one of the policies during the relevant period and have suffered loss or damage by reason of the alleged contravening conduct of Westpac, and/or at whose expense Westpac was unjustly enriched, as alleged in the statement of claim.

7    The applicant and group members are ordinary members of the community who, in connection with the acquisition of consumer credit facilities from Westpac, also acquired one of the consumer credit insurance policies issued by Westpac. The value of the individual claims of the applicant and each group member are very modest, but in aggregate may be very substantial.

8    I have been informed that the solicitors conducting the proceeding on behalf of the applicant are doing so on a “no win no fee” basis and there is no litigation funder involved. In proceedings of this kind, the legal costs to be expended on behalf of both parties are likely to be large.

9    Section 43(1A) of the FCA Act provides that, in a representative proceeding, the Court may not award costs against a person on whose behalf the proceeding has been commenced (except under s 33Q or s 33R of the FCA Act). Ordinarily, an adverse costs order made against an individual representative party in a case such as the present would be financially ruinous. There may be arrangements in place to protect the applicant from such an order in the present case, but there is no evidence before me concerning such arrangements.

10    Westpac has not sought security for its costs. The difficulties associated with an application for security for costs in proceedings such as the present have been discussed in many cases, most recently by Lee J in Abbot v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462 (leave to appeal refused in Zoetis Australia Pty Ltd v Abbott [2019] FCAFC 153). At the hearing on 7 August 2020, Westpac sought an order for production of any agreement that confers on the applicant a grant of indemnity or insurance in respect of the costs of the proceeding. The object of that order was to better inform Westpac as to whether it might make an application for security for costs. I declined to make that order because there was no issue between the parties that would justify the order.

11    The nature of this proceeding, as outlined above, accentuates the need to have regard to the fairness and proportionality of the legal cost burden that may be imposed by reason of procedural orders that are made, in order to promote the overarching purpose. That cuts two ways. With respect to the applicant, it is necessary to take account of the fact that the proceeding is being conducted on a “no win no fee” basis without the assistance of a litigation funder. For that reason, the Court will strive to avoid a disproportionate legal cost burden being imposed on the applicant. With respect to the respondents, it is necessary to take account of the fact that, on the evidence before the Court, there must be a real risk that, if the respondents are successful, they will not be able to recover their legal costs. For that reason, the Court will also strive to avoid a disproportionate legal cost burden being imposed on the respondents.

The pleaded case

12    The applicant’s amended statement of claim makes the following allegations of fact.

General allegations

13    The financial products that are the subject of the proceeding are three consumer credit insurance policies issued by Westpac:

(a)    Westpac Credit Card Repayment Protection, for credit cards issued by Westpac;

(b)    Westpac Flexi Loan Repayment Protection, for the loan product “flexi loan” advanced by Westpac; and

(c)    Westpac Personal Loan Protection, for personal loans advanced by Westpac,

which are defined in the pleading as the “Policies”. The Policies had standard terms that were set out in product disclosure statements.

14    The applicant alleges that he was issued with a Policy with respect to his Westpac flexi loan in April 2015. The applicant brings the proceeding on his own behalf and on behalf of any person who was issued a Policy in the relevant period.

15    The premiums on the Policies were automatically debited against the applicable credit card, flexi loan or personal loan and accrued interest.

16    Westpac earned substantial revenue and made substantial profits from the Policies, and was therefore motivated to issue and arrange or distribute as many Policies as possible.

No value or benefit allegations

17    The Policies were of no material value to, or were unsuitable for, or conferred no material benefits on, the applicant and group members by reason of the following five matters:

(a)    During the relevant period, the claims ratio, being the amount paid overall to policyholders as a proportion of the total insurance premiums for Westpac Credit Card Protection Policies, was 11.76% and for Westpac Flexi Loan Protection Policies and Westpac Personal Loan Protection Policies was 20.30%, which were:

(i)    in respect of Westpac Credit Card Protection, significantly lower than the claims ratio of 19% for consumer credit insurance generally over that period; and

(ii)    lower than the claims ratio of other types of insurance (e.g. travel insurance, home and contents insurance, domestic motor insurance) generally over that period.

(b)    During the relevant period, 17.4% of claims made by policy-holders on Westpac Credit Card Protection Policies were either declined by the insurer or withdrawn by the insured and 15.5% of claims made by policy-holders on Westpac Flexi Loan Protection and Westpac Personal Loan Protection Policies were either declined by the insurer or withdrawn by the insured.

(c)    At all material times, Westpac has had a financial hardship policy under which, relevantly, customers with credit cards and/or flexi loans and/or personal loans who were in financial hardship (including unemployment, sickness, reduced employment or marital breakdown) could apply to Westpac for financial assistance, including:

(i)    flexible payment arrangements;

(ii)    variations to loan repayments;

(iii)    reduced repayments; and

(iv)    repayment extensions.

(d)    During the relevant period, the applicant and a significant proportion of group members held separate life insurance cover, total and permanent disability insurance cover, and/or income protection insurance cover, including through their superannuation fund.

(e)    The applicant and a proportion of group members were excluded from one or more of the benefits under the Policies, as follows:

(i)    in respect of Westpac Credit Card Protection and Westpac Flexi Loan Protection, group members aged under 18 or over 65 were excluded from any benefits under the Policies, because of their age;

(ii)    group members who had any sickness, injury or disease that was the subject of a medical consultation during the six months immediately before the Policy commencement date and which prevented the policy-holder from carrying out the duties of their usual job, were excluded from the Unfit for Work Benefit;

(iii)    group members who were not working at least 15 or 20 hours (as the case may be under the relevant policy) were excluded from the Unfit for Work and Job Loss benefits;

(iv)    any group members who had any sickness, injury or disease that prevented them from carrying out the duties of one of their jobs, but continued to be able to perform the duties of their other job, were excluded from the Unfit for Work Benefit;

(v)    any group members who were employed by more than one employer and continued to be employed by one of those employers, were excluded from the Job Loss Benefit;

(vi)    the applicant and group members who were engaged in seasonal or contract work, or were hired to complete a specified task or to work for a specified period, were excluded from the Job Loss Benefit, to the extent that their unemployment was as a result of their seasonal, contract or specified work coming to an end;

(vii)    group members who were self-employed or in a business partnership and voluntarily or temporarily ceased to trade, were excluded from the Job Loss Benefit.

ASIC Reports allegations

18    Westpac was aware of each of the following ASIC reports at or around the time when it was issued:

(a)    ASIC report 256 titled ‘Consumer credit insurance: A review of sales practices by authorised deposit taking institutions’, which was issued on 19 October 2011;

(b)    ASIC report 361 titled ‘Consumer credit insurance policies: Consumers' claims experiences’, which was issued on 31 July 2013; and

(c)    ASIC report 622 titled ‘Consumer credit insurance: Poor value products and harmful sales practices’, which was issued on 11 July 2019.

19    In December 2017, ASIC required Westpac to undertake an independent review of its consumer credit insurance sales practices for the five-year period from January 2013 to December 2017, and Westpac undertook that review and provided the findings to ASIC.

Sales system allegations

20    During the relevant period, the Policies were sold by Westpac through sales channels including online, in branch, direct mail and telephone sales.

21    During the relevant period, from at least 17 February 2014, the Policies were sold by Westpac under a general advice model.

22    The applicant and at least some of the group members were sold the Policies in the following circumstances:

(a)    without their consent;

(b)    without them being fully or sufficiently informed of the exclusions to the cover applicable to them;

(c)    without them being fully informed that the cover was optional or separate to their credit card, flexi loan or personal loan application; and

(d)    without them being provided with an opportunity to first review the terms of the relevant Policy.

Misleading and deceptive conduct allegations

23    During the relevant period, the applicant and a proportion of group members:

(a)    were informed by Westpac, prior to acquiring or agreeing to acquire the relevant Policy, that they needed to take out the Policy, in order to obtain the credit card or personal loan; and/or

(b)    were not informed, sufficiently or at all, prior to acquiring or agreeing to acquire the relevant Policy, that they were acquiring the Policy or that the Policy was optional,

which conduct is alleged to be misleading and deceptive in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Inappropriate advice allegations

24    The applicant and some group members who acquired the Policy in branch or over the telephone acquired the Policy following a recommendation or statement of opinion by one or more Westpac representatives that they should purchase the Policy, and/or that they would benefit from purchasing the Policy, in circumstances:

(a)    that could reasonably be regarded as being intended to influence them in making a decision in relation to the Policy; and

(b)    where a reasonable person might expect the relevant Westpac representatives to have considered their objectives, financial situation and needs,

and, by reason of the matters comprising the no value or benefit allegations:

(c)    the Westpac representatives did not act in the best interests of the applicant and group members in relation to the advice and thereby contravened s 961B of the Corporations Act 2001 (Cth) (Corporations Act); and/or

(d)    it would not be reasonable to conclude that the advice provided by the Westpac representatives was appropriate to the applicant and group members, had the Westpac representatives satisfied the duty under s 961B to act in their best interests, and the Westpac representatives thereby contravened s 961G of the Corporations Act.

Unconscionable conduct allegations

25    From at least October 2011, Westpac knew, or ought to have known, that the Policies had no material value to, or were unsuitable for, or conferred no material benefits on, the applicant and group members.

26    The applicant and group members acquired the Policies in circumstances where:

(a)    Westpac was in a stronger bargaining position than the applicant and the group members, both generally and specifically in relation to financing and insurance products;

(b)    the applicant and group members were not given any opportunity to negotiate the terms of the Policies;

(c)    Westpac was not willing to negotiate the terms of the Policies;

(d)    Westpac had a contractual right to vary unilaterally the terms of the Policies; and

(e)    the applicant and group members were not given an adequate opportunity to consider whether the Policies were suitable for them.

27    The applicant and group members were required to pay higher premiums for the Policies than was reasonably necessary for the protection of the legitimate interests of Westpac General and Westpac Life (which is to be inferred from the loss ratios for each Policy).

28    Westpac benefited as a result of the Policies in that it was assured the satisfaction of any debt owed under the credit cards or personal loans in the event of the death of the applicant or group members.

29    The applicant and group members were not able to understand the Policy documents (with the applicant alleging that he did not receive the Policy documents).

30    Unfair tactics were used by the respondents, or persons acting on behalf of the respondents, in arranging the issue of the Policies (with the applicant presently relying on the misleading conduct allegations).

31    The applicant and group members could not acquire any other credit insurance policy for their Westpac credit cards and Westpac personal loans other than the Policies.

32    The applicant and group members could have acquired, from other suppliers, similar Policies with better claims ratios for credit cards or personal loans (financed by other financiers).

33    Under the Code of Banking Practice, which during the relevant period applied to the relationship between Westpac and each of the applicant and the group members, Westpac was obliged to provide effective disclosure of information to the applicant and the group members, and Westpac failed to do so in the ways stated above (particularly in respect of the sales allegations and misleading conduct allegations).

34    During the relevant period, Westpac failed to provide effective disclosure of information to the applicant and the group members (with the applicant relying on, amongst other allegations, the sales system allegations and the misleading conduct allegations).

35    Under the General Insurance Code of Practice of Banking Practice:

(a)    during the relevant period, Westpac General was obliged to ensure that its sales processes were conducted in a fair, honest and transparent manner;

(b)    since 1 July 2015, Westpac General was obliged to take reasonable steps to ensure that its and its employees’ and authorised representatives’ communications with group members were in plain language,

and Westpac General failed to do so.

36    By reason of the allegations made in the proceeding generally, in arranging the issue of the Policies to the applicant and to the group members, Westpac engaged in conduct, in trade or commerce and in connection with the supply, or possible supply, of financial services, which was, in all the circumstances, unconscionable, in contravention of s 12CB of the ASIC Act.

Mistake allegations

37    During the relevant period, the applicant and at least some group members acquired the Policies and paid the premiums under them under one or more of the following causative mistaken beliefs:

(a)    that they were required to take out the relevant Policy in order to obtain the credit card or personal loan, as the case may be; or

(b)    that the relevant Policy had material value to them,

and by reason of those mistaken beliefs, Westpac is liable to make restitution of those sums to the applicant and those group members.

Discovery

38    The parties have agreed the form of an electronic document exchange protocol, which is set out in Annexure A to the orders, and have also agreed the categories of documents in respect of which discovery is to be given by the applicant, which is set out in Annexure B to the orders. Their disagreement relates to the orders sought by the applicant for discovery from the respondents. While the disagreement generally relates to the scope of specific categories of documents to be discovered, it is convenient to address two headline issues at the outset. In respect of these issues, the applicant seeks to re-agitate issues on which I ruled on 7 August 2020.

The type of discovery order to be made

39    The first headline issue concerns the type of discovery order to be made. Rule 20.11 emphasises that orders for discovery must be directed to the overarching purpose. There are many ways that discovery orders can be formulated to achieve that goal. Rule 20.14 defines a form of standard discovery, which makes discoverable documents falling into four categories: (a) documents on which a party intends to rely; (b) documents that adversely affect a party’s own case; (c) documents that support another party’s case; and (d) documents that adversely affect another party’s case. The Rule also defines the requirements for a reasonable search for such documents. Rule 20.15 provides a framework for making other types of discovery orders, including discovery within certain categories of documents (being documents of a similar type or character). The Court’s Central Practice Note and the Commercial and Corporations Practice Note both emphasise that discovery can be extremely burdensome, particularly in commercial matters, and encourages the parties to utilise methods to minimise the burden of discovery.

40    On 7 August 2020, I indicated to the parties that discovery should be given by reference to categories of documents and that I would not make an order for standard discovery. The reason for that indication is that, within an organisation the size of Westpac, there could be an almost boundless quantity of documents that have some passing relevance to the issues raised on the pleadings. If standard discovery were to be ordered, there is the potential for very large searches for documents to be undertaken, and for very large volumes of documents to be discovered, with a great many having marginal relevance. That imposes a cost burden on both the respondents giving discovery and the applicant receiving discovery, accompanied by the potential for the most relevant material to be buried in a mass of only marginally relevant material. There is also considerable potential for ongoing disagreement between the parties about the nature and scope of searches undertaken by the respondents, and whether certain types or categories of documents have been examined in the discovery exercise. In a case such as the present one, I consider that an approach by which the applicant specifies categories of documents targeted to the issues in dispute is more likely to produce the most relevant documents at the least cost.

41    Despite that indication given on 7 August 2020, by its proposal made on 28 August 2020, the applicant seeks discovery by way of categories but also seeks an order that the respondents give discovery of “documents that meet at least one of the criteria specified in r 20.14(2) and of which they are already aware, or become aware, without the need to undertake further searches”. The applicant submitted that that category imposes no burden on Westpac because it is limited to relevant documents of which they are already aware or become aware during the course of the proceeding, and which do not otherwise fall within the other categories, and the order meets the overarching purpose. It is unnecessary to debate whether the order is in the nature of a “category”. In effect, it seeks standard discovery of documents of which Westpac is already aware. I do not consider that that is a necessary or reasonable order to make. As Westpac points out, the order raises obvious practical problems: what does awareness mean in an organisation that has many thousands of employees? I also accept Westpac’s submission that the applicant has not shown that such an order is necessary to ensure the fair resolution of the real issues in dispute. In my view, the categories of documents the subject of the orders I have made are appropriate to ensure that directly relevant documents will be searched for and produced on discovery.

Discovery of emails and file notes

42    The second headline issue concerns the discovery of emails by Westpac in respect of the relevant period (being a 10 year period). The applicant seeks discovery of the following two categories of documents:

(a)    (Category 6) File notes and emails of the persons responsible for conducting or responding to the investigations, audits, reports, memoranda or summaries referred to in category 5, containing comments, responses or analysis of those investigations, audits, reports, memoranda or summaries.

(b)    (Category 7) Emails since 1 July 2009 of the persons who held the positions identified in paragraph 6 of the affidavit of Christopher Prestwich dated 19 June 2020 and persons who were involved in the management or oversight of the Policies (i.e. persons whose job title included manager, leader or coach), relating to:

a.     the existence or absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers;

b.     the manner in which the Policies were being sold to customers.

43    Category 6 cross-references category 5, which is itself a very broad category. It covers investigations, audits, reports, memoranda, actuarial advice or summaries, dated 1 July 2009 or later, relating to 11 different matters which are the subject of the pleaded allegations. In the ordinary course, it would be expected that there would be a large number of persons responsible for conducting or responding to such matters over the 10 year period covered by the document category. It follows that proposed category 6 would involve a very large discovery task, first to identify all such persons and second to search for file notes and emails of those persons.

44    Category 7 cross-references paragraph 6 of the affidavit of Christopher Prestwich dated 19 June 2020. That affidavit was made in accordance with an order of the Court requiring Westpac to set out the names of any committees (including sub-committees), working groups or teams which managed or governed the Policies in the period since 1 January 2009, as well as the members of the same. Paragraph 6 identifies persons within Westpac from whom Mr Prestwich took instructions in preparing the affidavit and the positions they held. The positions are: Head of Product & Underwriting, General Insurance; CCI Product Manager, General Insurance; Senior Manager, General Insurance; and Senior Manager, GI Actuarial Pricing, General Insurance. However, category 7 is not confined to persons who held those positions over the relevant period. It also extends to any persons who were involved in the management or oversight of the Policies. Again, it would be expected that that includes a significant number of people. It follows that category 7 would also involve a very large discovery task.

45    The applicant submitted that a key allegation in the pleading is that Westpac knew, or ought to have known, the absence of value, benefits or suitability of the Policies to customers, which is denied by Westpac. The applicant argues that, in order to prove the requisite state of mind, it will be necessary to identify individuals within Westpac who held the state of mind, as aggregation of knowledge is generally not permitted: Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 at [64]-[67] (Allsop CJ), [81]-[83] (Besanko J), [118] (Edelman J). The applicant says that email is the primary mode in which bank officers communicate with one another and that it is expected that Westpac will have internal emails on this topic, which can be located relatively easily through targeted searches, and which reveal what was known by relevant individuals within the organisation at the relevant time on the topic of absence of value, benefits and suitability of the Policies. The applicant submitted that documents such as minutes of meetings, policy documents and other summary documents which will be discovered are no substitute for emails because such documents are usually anodyne. It is only emails that will disclose what information was known internally and when and by whom, whether and how information was passed (or not passed) up the internal chain, and what internal considerations there were within Westpac about particular topics (referring to Australian Competition and Consumer Commission v Medibank Private Limited (2018) 267 FCR 544 from [202] as an illustration).

46    The applicant also argued that a key aspect of his case is the flaws in the sales system through which the Policies were arranged for customers. ASIC issued reports, in particular Report 256 published in 2011 which described deficiencies in the sales methods of banks’ consumer credit insurance policies, and linked these to the absence of value and benefits associated with the policies. ASIC’s continued concerns about these matters prompted Westpac to engage Deloitte to undertake an independent review in relation to the sale of consumer credit insurance policies, resulting in the Deloitte Independent Review dated 8 October 2018. The Independent Review revealed deficiencies in Westpac’s sales systems, including as to sales to customers without their consent, insufficient explanation of the exclusions of cover, insufficient explanation that the policy came at a cost, which was separate from the loan and issuing of policies prior to provision of the policy terms to customers. The applicant says that email correspondence between key personnel about the ASIC report, what was or was not done to implement its recommendations, the gaps in compliance, and the flaws in the sales systems, are relevant to show what relevant individuals knew and what if any action they took. The applicant says that these matters are relevant circumstances as part of the enquiry as to whether Westpac engaged in systemic unconscionable conduct.

47    The applicant’s submissions proceeded on the basis that it is axiomatic that, in a class action such as the present, the applicant will be entitled to discovery of the respondents’ emails. Such an assumption is contrary to s 37M of the FCA Act, r 20.11 of the Rules and the practice notes of the Court. The need for such discovery depends on the issues in dispute and the likely relevance of emails when balanced against other documentary evidence and the likely cost of discovery. The applicant’s reliance on Australian Competition and Consumer Commission v Medibank Private Limited (2018) 267 FCR 544 is misplaced. The allegation in that case was that a specific decision made by Medibank was unconscionable, the decision being to terminate certain agreements with pathology and radiology providers which had the effect that members using those providers may incur out-of-pocket expenses, without giving notice to its members. A relevant issue was the reason for Medibank’s decision, and emails relating to that issue were discovered. That case is not analogous to the present case.

48    I am not persuaded that discovery categories 6 and 7 proposed by the applicant will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. To the contrary, I consider that proposed discovery categories 6 and 7 are likely to generate very large volumes of irrelevant documents, imposing an excessive and unnecessary cost burden on Westpac giving discovery and on the applicant in reviewing the documents in the hope of finding something relevant to its case. The reasons for that view are as follows.

49    First, the applicant’s primary argument in support of the proposed categories is that they are relevant to proving Westpac’s state of mind, which in turn is relevant to proof of the unconscionable conduct allegations. In my view, the applicant overstates the significance of its pleaded allegations concerning Westpac’s knowledge.

50    As outlined earlier, the applicant’s case is based on a number of causes of action, specifically, misleading and deceptive conduct in contravention of s 12DA(1) of the ASIC Act, inappropriate advice in contravention of ss 961B and 961G of the Corporations Act, unconscionable conduct in contravention of s 12CB of the ASIC Act and in restitution on the ground of mistake. The applicant only pleads that Westpac had knowledge of certain facts in connection with the unconscionable conduct claim (apart from uncontroversial pleas that Westpac knew the terms of the Policies and was aware of the ASIC reports referred to in the pleading). In the context of the unconscionable conduct claims, the applicant pleads only that Westpac knew or ought to have known that the Policies had no material value or benefit to customers.

51    In order to understand the applicant’s allegation that Westpac knew or ought to have known that the Policies had no material value or benefit to customers, it is necessary to understand the basis of the applicant’s pleaded allegation that the Policies had no material value or benefit to customers. In support of that allegation, the applicant relies on five matters, which are objective factual matters, and at least 4 of which are broadly admitted by Westpac (in terms of the objective facts):

(a)    the claims ratio for the Policies;

(b)    the proportion of claims made under the Policies that were either declined or withdrawn;

(c)    Westpac’s financial hardship policies for its consumer credit products;

(d)    the fact that the applicant and group members held other insurance such as life insurance, disability insurance and income protection insurance; and

(e)    the exclusions under the terms of the Policies.

52    Westpac does not admit that the applicant and group members held other insurance such as life insurance, disability insurance and income protection insurance.

53    While Westpac puts in issue the allegation that it knew or ought to have known that the Policies had no material value or benefit to customers, the actual matters in issue between the parties largely concern the question about other insurance products held by customers and the pleaded conclusion: that the five matters relied on by the applicant lead to the conclusion that the Policies had no material value or benefit to customers. The relevant issue is whether proposed discovery categories 6 and 7 are necessary for the just resolution of those issues.

54    Second, the proposed discovery categories other than 6 and 7 are likely to produce relevant documents bearing upon the pleaded allegation of knowledge. In particular:

(a)    Category 3 covers meeting papers, minutes and records from the committees, working groups and teams identified in paragraph 10 of the affidavit of Christopher Prestwich dated 19 June 2020, the Independent Review and any equivalent groups, as they relate to the management and oversight of the sale and distribution of the Policies, which relate to, amongst other things, the existence or absence of value, benefits and suitability of the Policies to customers. Paragraph 10 of the affidavit of Christopher Prestwich identified numerous committees and working groups that had management responsibility for the Policies during the relevant period.

(b)    Category 5 covers documents in the nature of investigations, audits, reports, memoranda, actuarial advice or summaries dated 1 July 2009 or later relating to, amongst other things, the existence or absence of value, benefits and suitability of the Policies to customers, complaints made in respect of the Policies or ASIC Reports 256, 361 and 622.

(c)    Category 8 covers documents provided to Deloitte for the purposes of its Independent Review.

(d)    Category 10 covers correspondence and records of meetings with several government, industry and regulatory bodies in respect of, amongst other things, the absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers.

55    Third, when analysed, proposed category 6 seeks documents in the nature of Westpac internal commentary on internal commentary. It seeks file notes and emails of persons conducting or responding to the production of the internal documents referred to in category 5. I reject the applicant’s submission that the documents discoverable under category 5 will be anodyne. In my view there is no basis for that submission and it is mere assertion. Category 5 covers a wide range of types of documents, from audits to memoranda. At this stage of the proceeding, I consider that it is inconsistent with the overarching purpose to trawl through internal commentaries on category 5 documents when the applicant does not know what will be revealed by the category 5 documents. I will return to the question whether the applicant may make a more limited application for further discovery depending on what is disclosed by the category 5 documents or any other discovered documents.

56    Fourth, proposed category 7 seeks emails from persons at a management level on two topics: the existence or absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers; and the manner in which the Policies were being sold to customers. I have already addressed the “absence of value and benefits” topic. I do not consider that a general search for emails relating to that topic over a 10 year period from “persons who were involved in the management or oversight of the Policies” is justified having regard to the nature of the pleaded allegations. In relation to the second proposed topic, emails relating to the manner in which the Policies were being sold to customers, many of the other discovery categories are directed to that issue:

(a)    Category 2 covers scripts, checklists, training materials, manuals and any other policy/procedure documents of one or more of Westpac or third parties involved in the sale and distribution of the Policies as in force from 1 January 2010 onwards relating to the sale and distribution of the Policies.

(b)    Category 3 covers committee, working group and team papers which relate to the sale and distribution of the Policies.

(c)    Category 4 covers template customer correspondence in relation to the Policies.

(d)    Category 5 covers documents in the nature of investigations, audits, reports, memoranda, actuarial advice or summaries dated 1 July 2009 or later relating to the sale and distribution of the Policies.

(e)    Category 9 covers contracts and agreements between Westpac and any third parties in respect of the sale and distribution of the Policies.

(f)    Category 10 covers correspondence with and records of meetings with several government, industry and regulatory bodies in respect of the manner in which the Policies were being sold to customers.

57    For those reasons, I consider that discovery of proposed categories 6 and 7 are not justified. I leave open the possibility that, once discovery has been given by Westpac in respect of the other categories, the applicant might renew its application for discovery of emails in a far more targeted way. The contents of particular discovered documents may point to the likely existence of other documents, including emails, which may be relevant to the issues in dispute. Any such targeted application would be considered on its own merits having regard to the likely relevance of the documents and the costs imposed by a more limited email search.

58    The remainder of these reasons address the other disputed categories.

Category 1: applicant’s customer file

59    The applicant seeks discovery of “documents comprising the applicant’s customer file in his capacity as holder of any Policy (in effect from 1 January 2010 or later), and/or the products the subject of any Policy (in effect from 1 January 2010 or later), including all records of communications to and from the applicant and any file notes”. The respondents propose discovery of “documents comprising the applicant's customer file in his capacity as the holder of the Policy which were not provided in the initial tranche of discovery provided by the respondents on 19 June 2020”.

60    The parties’ submissions identify two areas of dispute in relation to category 1. The first is whether discovery should be directed to the Policy that the applicant alleges he was issued, or whether it should be directed to any Policy that was issued by Westpac to the applicant in the relevant period. The second area of dispute is whether discovery should only be directed to the applicant’s customer file in his capacity as holder of the Policy, or whether it should extend to the applicant’s customer file in his capacity as holder of the financial products the subject of the Policy.

61    In relation to the first area of dispute, the applicant has only alleged that he held a single Policy issued in connection with his Westpac flexi loan in April 2015. The applicant submitted that he has recently become aware that he may have held an earlier Policy in respect of a Westpac credit card held by him. However, he has not taken any steps to amend the pleading in that respect. Instead, the applicant submitted that any other Policy held by him during the relevant period (not presently pleaded) is relevant to the issues in dispute, including whether the subsequent policy was necessary and beneficial, and also the flaws associated with the sales system such as whether customers consented to the purchase of the Policies and indeed knew that they were being issued. I reject those submissions. There is no basis on the pleading to suggest that a Policy issued in respect of the applicant’s credit card debt has any bearing on the value to the applicant (in terms of insurance benefits) of the Policy issued in respect of a different consumer loan. Nor are the methods of sale of other Policies held by the applicant relevant to the issues raised in the case unless the applicant relies on them in his case. As matters presently stand, discovery should be directed to the Policy pleaded by the applicant. However, it would be surprising if the applicant was unable to find out from Westpac whether he held other Policies during the relevant period and I would expect Westpac to provide that information to him. It will then be up to the applicant whether he wishes to expand his case to include any such other Policies.

62    In relation to the second area of dispute, the applicant submitted that documents relating to the underlying financial products insured by the Policy are relevant to issues in the proceeding including whether the applicant was told that the Policy was optional and any hardship policy that applied to the underlying financial products. The submission is stated too broadly and I disagree that it is necessary for Westpac to give discovery of the applicant’s customer file for the underlying financial products insured by the Policy as a category of discovery. The applicant is entitled to receive any documents from his customer file with Westpac that concern the Policy acquired by him and that bear upon the allegations in the proceeding. Only Westpac knows how its files relating to the Policy issued to the applicant are organised. A separate file may exist by reference to the Policy issued to the applicant, or a file might exist by reference to the underlying financial product insured by the Policy (but which records communications relating to the sale of the Policy), or both might exist. The relevant category should be neutral to the manner in which Westpac maintains its files. The category of documents proposed by Westpac is “any documents comprising the applicant's customer file in his capacity as the holder of the Policy which were not provided in the initial tranche of discovery provided by the respondents on 19 June 2020”. In my view, that category will extend to all relevant documents concerning the Policy issued to the applicant able to be sourced from customer files held by Westpac in respect of the applicant however those customer files may be maintained by Westpac. I accept that Westpac’s hardship policy that applied to the underlying financial product insured by the Policy issued to the applicant is relevant to the pleaded allegations. However, discovery of the hardship policy is already proposed under discovery category 2.

Category 2: policy and procedure documents

63    Category 2 concerns scripts, checklists, training materials, manuals and any other policy or procedure documents of Westpac or third parties involved in the sale and distribution of the Policies. There are three areas of dispute.

64    The first area of dispute is whether discovery should be directed to such documents in relation to the sale and distribution of the Policies, or whether discovery should extend to such documents in relation to the sale and distribution of the financial products the subject of the Policies. The applicant submitted that the latter documents are relevant because the Policies were often sold at the time of sale of the underlying products, the training of staff in respect of the sale and distribution of the underlying products will be relevant to the applicant’s claim that Westpac provided personal advice to the applicant and some group members and the allegation that Westpac informed the applicant and group members that they needed to take out the Policy in order to obtain the underlying financial product. Again, in my view, the submission is stated too broadly and I disagree that it is necessary for Westpac to give discovery of policy and procedure documents for the underlying financial products insured by the Policies as a category of discovery. The category of documents proposed by Westpac is, relevantly, “scripts, checklists, training materials, manuals and any other policy/procedure documents of one or more of the respondents or third parties involved in the sale and distribution of the Policies … relating to the (a) training of staff in relation to the Policies; (b) sale and distribution of the Policies”. In my view, that category will extend to all relevant documents concerning the Policies whether those documents are specific to the sale of the Policies or whether the documents (or parts of documents) form part of a broader policy and procedure that concerns the underlying financial products. However, it is only the sale of the Policies that are in issue in the proceeding, not the sale of the underlying financial product. Contrary to the implication of the applicant’s submission, the pleaded allegations relating to personal advice only concern the Policies. It is not pleaded that personal advice was given in connection with the sale of the underlying financial product.

65    The second area of dispute is whether Westpac should be required to give discovery of policy or procedure documents relating to “commissions, rewards and bonuses received by persons in relation to the sale and distribution of the Policies”. The applicant submitted that this category is relevant to the “system of conduct and pattern of behaviour” alleged in respect of the sale of the Policies. I reject that submission because again it is stated at too high a level of generality. Nevertheless, the applicant has alleged that Westpac was motivated to issue and arrange or distribute as many Policies as possible. While that allegation is premised on the alleged revenue and profits earned by Westpac from the sale of the Policies, I consider that policies and procedures relating to sales commissions, rewards and bonuses has sufficient relevance to the pleaded allegation to justify discovery being given.

66    The third area of dispute is whether Westpac should give discovery of its policies and practices “in relation to customers who die with a credit card, personal loan or flexi loan balance or liability”. The applicant submitted that the category is relevant to the pleaded allegation that the Policies (and particularly the death benefit under the Policies) were of no value to, or conferred no benefits on, the applicant and group members. I accept that submission. As observed by the applicant, it is relevant to know if Westpac’s policy during the relevant period was to write off the debt of a customer who dies with a credit card or unsecured consumer loan balance, rather than pursue the customer’s estate for that balance, because that may affect the Court’s findings regarding the value of the death benefit under the Policies.

Category 5: high level documents regarding value, suitability, sales practices and complaints

67    This category covers investigations, audits, reports, memoranda, actuarial advice or summaries, dated 1 July 2009 or later, relating to a range of matters that are the subject of the pleaded allegations. There are three areas of dispute.

68    The first area of dispute is the inclusion of the prefatory words “documents in the nature of”. The applicant seeks the inclusion of those words to ensure the category is not open to an unduly restricted interpretation when conducting discovery. While I generally consider the words to be unnecessary, there is no harm in including them.

69    The second area of dispute concerns such documents in so far as they relate to ASIC investigations in relation to the Policies. It is agreed that the category should cover such documents in so far as they relate to ASIC Reports 256, 361 and 622 which are public reports that concern consumer credit insurance policies and are the subject of pleaded allegations. The applicant argues that the category should extend to such documents in so far as they relate to any ASIC investigation in relation to the Policies. It submitted that investigations by the regulator in relation to the Policies are relevant to the community and society values underpinning the concept of unconscionability. It is difficult to know what that means. The extension of the category would cover Westpac’s internal responses to any ASIC investigation of an individual complaint relating to one of the Policies. I am not persuaded that such documents are likely to have sufficient relevance to the pleaded allegations to justify the cost of searching for them.

70    The third area of dispute concerns such documents in so far as they relate to “reports run by Genpact and produced to the Underwriting and Customer Support team”. In support of this category, the applicant relied on statements made in Deloitte’s Independent Review into the sale of Westpac’s consumer credit insurance. Deloitte’s review described Genpact as “an offshore team”, but did not describe the scope of reports published by Genpact. One report described by Deloitte, and produced by Genpact, was called the “Day 2” report. The Day 2 reports were intended to detect incorrectly written policies (applications for Policies where customers were outside the eligible age bracket or where customers did not meet the employment criteria at the point of sale) within 24 hours of the application being made. As Day 2 reports are addressed by another discovery category, the applicant did not press this request.

Category 8: Documents provided to Deloitte

71    This category covers documents provided to Deloitte for the purposes of the Independent Review and the report described as the Sales Practices Review provided by Westpac to ASIC in March 2017. As these reports directly concern the matters that are the subject of the proceeding, in my view the documents in this category are likely to be relevant to the issues in dispute. Westpac argued that documents in this category are likely to be the subject of other categories and otherwise irrelevant. While I accept that not every document in this category will be relevant to the issues in the proceeding, in my view the category is likely to contain a considerable number of relevant documents making it an appropriate discovery category.

Category 9: Contractual documents and communications

72    This category covers contracts, agreements, and communications and records of meetings in respect of the sale and distribution of the Policies:

(a)    between Westpac on the one hand and any third parties which were involved in the sale, design and/or distribution of the Policies on the other hand; and

(b)    between the Westpac respondent entities.

73    In relation to contracts and agreements, Westpac argued that the terms on which any third party was engaged by Westpac to design, distribute or sell the Policies is not a question relevant to any issue in the proceeding. The only relevant allegation is that Westpac acted on behalf of (or, in a proposed amendment, as agent of) Westpac Life and Westpac General. Accordingly, only contracts going to that relationship are properly discoverable. I do not accept that submission as I do not consider that the sales system allegations are confined in the manner stated by Westpac. The sales system allegations do not specify whether the sales task was undertaken by a Westpac entity or a sales agent. In my view, it is appropriate for the applicant to have discovery of the contractual arrangements under which sales occurred.

74    In relation to communications and records of meetings, the applicant submitted that the documents will provide evidence of instructions given to the sales persons about the sales methods of the Policies, what feedback was passed on from sales persons about the sales practices and the flaws in them, which is relevant to the sales system allegations. Conversely, Westpac argued that the category is framed too broadly, capturing all communications between Westpac and the sales persons regardless of whether the communication has any relevance to the issues in the proceeding. I accept Westpac’s submission. Further, category 2 already covers scripts, checklists, training materials, manuals and any other policy/procedure documents of Westpac and third parties involved in the sale and distribution of the Policies relating to, amongst other things, the training of staff in relation to the Policies, the sale and distribution of the Policies and monitoring and quality assurance of staff involved in the sale and distribution of the Policies.

Category 10: Correspondence and meeting papers with government, regulatory and industry bodies

75    This category covers correspondence with and records of meetings (including minutes) with government, industry and regulatory bodies (including ASIC, APRA, ACCC, Parliamentary Committees, Australian Banking Association, the Financial Ombudsman Service and Australian Financial Complaints Authority) in respect of (a) the existence or absence of value, benefits and suitability of the Policies for customers and the benefit of the Policies to customers and (b) the manner in which the Policies were being sold to customers.

76    Westpac submitted that the category is unjustifiably broad. It says that, to the extent that items (a) and (b) appear to limit the category to documents relevant to those issues, the category is otiose in the light of the extensive scope of the balance of the categories (especially 2, 3, 5 and 11). To the extent that the category goes further, capturing communications simply because they are had with various regulatory bodies, it is unnecessary and liable to capture material irrelevant to the underlying factual issues of the Policies’ value and sales processes and Westpac’s knowledge (or otherwise) of them.

77    In my view, the category is appropriate although it should be refined to ensure it captures relevant and not irrelevant material. In particular, the category should be confined to identified government or regulatory bodies and documents in respect of the absence of value of benefits of the policies and defects or deficiencies in the manner in which the Policies were sold. Given the regulatory attention that was given to the Policies during the relevant period, it is likely that documents within this category will be relevant to the issues raised and may contain admissions on the part of Westpac.

Category 11: Consumer credit insurance premiums and claims paid

78    This category covers records of consumer credit insurance premiums and claims paid since 1 January 2010.

79    It is common ground that this category is relevant, and only relevant to, the applicant’s allegation concerning the claims ratio of the Policies during the relevant period. However, the parties disagree whether Westpac should give discovery of a suitable summary (aggregation) of premiums and claims paid during the relevant period which would enable the calculation of the claims ratio, or whether Westpac should give discovery of the underlying data which the evidence shows is stored electronically.

80    Westpac submitted that it is oppressive and neither necessary nor appropriate to produce data in respect hundreds of thousands of customers over a 10 year period. However, it adduced no evidence to show that production of the underlying data will be unduly burdensome. In proceedings in this Court, large quantities of financial data are commonly downloaded into databases and made available to a litigant.

81    The applicant submitted that it wishes to undertake its own analysis of data concerning premiums and claims and not rely on Westpac’s calculations. I accept that, if the applicant does not accept Westpac’s calculation, it is entitled to examine the underlying data itself or have a referee or Court appointed expert undertake that task.

82    Weighing the competing submissions, at this stage I will confine the discovery to be given by Westpac to producing a document which records the total premiums collected and the total claims paid in relation to each type of Policy (i.e. Credit Card Repayment Protection, Flexi Loan Repayment Protection and Personal Loan Protection) in each calendar year between 1 January 2010 and 31 December 2019. It may be that the figures produced by Westpac accord with the applicant’s views, and other available data, such that the applicant does not need to go further. If after receiving that discovery from Westpac the applicant is not satisfied, a number of steps will be open to it. It may wish to interrogate Westpac about the methodology used in compiling the summary document; it may wish to apply to the Court for the appointment of a referee or expert to perform calculations in respect of the underlying premium and claims data; or it may renew its application for access to the underlying data.

Opt out notice

83    At the case management hearing on 7 August 2020, the applicant proposed standard opt out orders being:

(a)    an order pursuant to ss 33J and 33ZF of the FCA Act, fixing the date by which a group member may opt out of the proceeding;

(b)    an order pursuant to ss 33X and 33Y of the FCA Act approving the terms of the opt out notice to be given to group members; and

(c)    an order pursuant to ss 33Y and 33ZF of the Act in relation to the procedure for giving the opt out notice to group members.

84    The parties disagreed about various aspects of those orders. Westpac was concerned that the solicitors for the applicant had modified, to some extent, the common form of opt out notice that has been approved in this Court in many class actions. The solicitors for the applicant explained that they had endeavoured to make the notice more readable and comprehensible to group members. I indicated at the hearing on 7 August 2020 that I would approve the form of notice that the applicant seeks to issue unless Westpac could persuade me that there were deficiencies in that form. There is usually room for improvement in the form of notices given to members of the public about Court proceedings, and actions they may need to take in respect of Court proceedings, and the Court should not be tied to previous forms if improvements can be made. I also addressed a number of specific aspects of the notice.

85    At the hearing on 25 September 2020, the parties remained in disagreement about a number of issues which I resolved. These are my reasons in respect of those issues.

Form of opt out notice

86    Westpac raised a number of drafting issues with regard to the applicant’s form of opt out notice, as well as two substantive issues.

87    In relation to the drafting issues, I am not persuaded that any are sufficiently significant to warrant any changes to the form of notice that is proposed by the applicant. Two matters, that were the subject of submission, should be mentioned. The first concerns notification to group members who choose not to opt out that they may register their contact details with the solicitors for the applicant so that the group member can receive further updates about the progress of the proceeding. I accept that offering group members (who do not opt out) the option of registering their contact details with the solicitors for the applicant is beneficial so that they can receive further information about the proceeding. I do not consider that the positioning of that notification within the opt out notice proposed by the applicant will cause confusion. The second concerns what Westpac describes as superfluous references to the consequences of remaining in the proceeding or opting out. While I accept that certain matters are repeated in the applicant’s proposed form of notice, I do not think that the repetition is harmful.

88    The first of the two substantive matters in dispute is the applicant’s wish to include in the opt out notice a hyperlink to an explanatory video. At the hearing on 7 August 2020, I indicated that, while forms of communication such as video may often be more effective than written notices, I was disinclined to include such a link in the opt out notice unless the form of the video was approved by the Court or agreed between the parties. The reason is that the opt out notice is a formal communication about a representative proceeding in the Court and is required to be approved by the Court in exercise of its supervisory powers. As the opt out notice is typically headed “Federal Court of Australia”, and contains a statement that the notice is sent in accordance with orders made by the Court, group members receiving the notice are entitled to think that the content of the notice has been approved by the Court. If the notice contains a link to additional material, whether in the form of writing, video or audio, a group member would be entitled to think that that additional material has been approved by the Court. For that reason, the Court should not sanction the inclusion of such material by way of link in the notice unless it is satisfied that the material is appropriate. As at the hearing on 7 August 2020, there was no evidence before the Court in relation to the proposed contents of the video.

89    In materials filed on 28 August 2020, the applicant renewed its request to include a hyperlink in the opt out notice to an explanatory video. By its further affidavit evidence, the applicant included a proposed script for the video. The script commences in an appropriate manner by describing, in plain terms, what is contained in the opt out notice. I infer from the script that the video will display relevant pages of the opt out notice and the script will be read by way of description. If that was all that the script covered, I would be inclined to approve the link. I consider that it may be helpful for some members of the community to receive essentially the same information that is contained in a written notice in a video format. However, the script for the video is considerably more expansive. It ventures into a broader explanation of class actions, and then provides additional information about this proceeding. While the script largely conveys factual information about the proceeding, in my view it also has a flavour of promoting the proceeding to group members. I think it is inappropriate for a formal notice approved by the Court to contain a link to a video having that flavour.

90    The applicant is generally free to provide information about the proceeding, and promote the proceeding, to the public at large (and thereby connect with potential group members), again subject to the supervisory powers of the Court to ensure such information is not misleading. In particular, the solicitors for the applicant are free to promote the proceeding on their website. The opt out notice contains many references to the solicitors for the applicant. It would be expected that recipients of the opt out notice, who wished to find out more information about the proceeding, would visit the website of the solicitors for the applicant. The solicitors for the applicant are free to include on their website a video relating to opt out, just as they are free to include other information about the proceeding (provided, of course, that the information is not misleading).

91    The second of the two substantive matters concerns statements in the opt out notice relating to the relief sought in the proceeding. The applicant’s form of notice states that, if the action succeeds, the Court “may be asked to make declarations that some Policies are void, in addition to monetary relief”, and that “Your consent will be requested before any declaration that your Policy is void is made”. The respondents submitted that that statement is inconsistent with the relief claimed in paragraph 5 of the applicant’s amended originating application, which seeks an order “declaring void each Policy entered into as a result of the first respondent’s contraventions of Div 2 Pt 7.7A of the Corporations Act” and contains no reference to seeking consent. The respondents say that the opt out notice should be consistent with the originating process. In response, the solicitor for the applicant, Andrew Paull, has deposed that, if the applicant is successful at the initial trial and the Court is minded to make orders voiding group members’ policies, then group members that have an extant policy will be asked whether they wish to seek that remedy from the Court and have their policy voided. The same approach will be taken to any proposed settlement which involves voiding or cancellation of a group member’s policy. In that way, no group member will have their policies voided or cancelled without first obtaining their express consent.

92    In my view, the applicant’s proposed approach to the issue of remedy, and the statements to be included in the opt out notice, are appropriate. In civil litigation, it is common for an applicant to seek a range of remedies some of which will be alternatives. Where issues of liability and relief are determined separately in the proceeding, an applicant may not need to make an election between forms of relief until liability is established. Similar principles apply in the context of representative proceedings. A representative proceeding may seek a range of remedies some of which will be alternatives. Typically in representative proceedings, issues of relief are not determined until after issues of liability are determined. The determination of liability may involve common questions of fact and law as well as questions that are individual to the applicant and each group member. So too, the form of relief ultimately sought may, depending on the nature of the case, raise individual choices for the applicant and group members. It is not a requirement of a representative proceeding that the applicant and group members all seek the same relief. Section 33C(1) of the FCA Act requires that there are seven or more persons who have claims against the same person, which are in respect of or arise out of the same, similar or related circumstances and give rise to a substantial common issue of law or fact. The word “claims” does not mean an entitlement to relief, far less a specific form of relief: Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (1998) 84 FCR 512 at 523 per Lindgren J; Bray v F Hoffmann-La Roche Ltd (2003) 130 FCR 317 at [113] per Carr J and at [245] per Finkelstein JJ. It is well recognised that the lawyers acting for the applicant in the proceeding have duties to group members, although the extent of those duties is not settled: Kelly v Willmott Forests Ltd (in liquidation) (No 4) [2016] FCA 323; (2016) 335 ALR 439 at [220] and [308] per Murphy J, cited in Dyczynski v Gibson [2020] FCAFC 120 at [209] per Murphy and Colvin JJ. Where the applicant and group members may ultimately be entitled to seek different forms of relief in the proceeding, and where their interests may differ with respect to the forms of relief, it is necessary for the lawyers representing the applicant in the proceeding to inform group members of their options so that group members can exercise effective choice with respect to relief.

Method of distribution

93    There are a large number of potential group members. The orders for distributing the opt out notices require Westpac to provide a third party mailing house with the name, email address, postal address, name of the Policy purchased, date of the Policy purchased and the date of the cancellation of the Policy purchased (if applicable) of any persons known to Westpac who:

(a)    purchased a Westpac Credit Card Protection, Westpac Flexi Loan Protection or Westpac Personal Loan Protection policy, on or after 1 January 2010;

(b)    has paid a premium for a Westpac CCI Policy; and

(c)    has not been refunded in full for the premium paid or has not successfully claimed more than the premium paid amount.

94    The orders also contemplate that the opt out notices will be sent by email where an email address is available to Westpac. Where no email address is available, or where there is a delivery failure in relation to an email sent, the opt out notice will be sent by prepaid ordinary post.

95    There are three areas of disagreement between the parties.

Identification of mailing house

96    Westpac’s proposed orders nominate Computershare as the third party mailing house to undertake distribution of the opt out notices. The applicant proposes that the orders will allow the parties to agree the mailing house. As the costs of distribution of the notices are to be met by the applicant in the first instance, it seeks an opportunity to negotiate and obtain the best available quote for the costs of the mailing house. The applicant submitted that once the scale of the distribution has been confirmed by Westpac, including the number of emails to be sent and the number of postal notices to be sent, it will be possible for the applicant to seek quotes from different providers. The applicant submitted that such quotes can vary significantly and it is usually possible to seek to reduce the cost of distribution by negotiation with different providers.

97    I accept the applicant’s submissions. It should be entitled to negotiate the best deal it can to minimise costs. If a disagreement arises between the parties as to the mailing house to be appointed, the parties can apply to the Court to resolve the dispute.

Email domain

98    In so far as the opt out notices are sent by email, the applicant proposes that the email notices be sent from a ‘no reply’ Westpac email domain (i.e. ending in @westpac.com.au). The applicant submitted that this will reduce the prospect that recipients will incorrectly conclude that the email is a scam and disregard the notice.

99    Westpac opposes the use of its domain name. It submitted that it would be inappropriate and potentially misleading for the email to come from a Westpac sender email address or domain given the nature of an opt out notice as a communication from the Court. In oral submissions, it also argued that there are legal difficulties associated with a third party mailing house having access to the Westpac domain name. However, the nature of those difficulties was not addressed by evidence making it difficult for the Court to assess the argument. Instead of using Westpac’s domain name, Westpac has proposed that the notice be sent from an email address titled “westpaccciclassaction@au.e-notification.net”, with the subject line “IMPORTANT: Westpac CCI class action – Federal Court of Australia Notice”. The email would be marked as “High Importance” and the content of the notice would appear in the email as embedded text with clickable hyperlinks.

100    I accept the submission of the applicant that the domain name used in an email is likely to affect whether the email is treated by the recipient, or the recipient’s email software, as spam or phishing. While the subject line of the email may assist in the recognition of an email as legitimate and important, it is common for scam emails to use words such as “important”, and other words having a legitimate appearance, in the subject line. The domain name is a more reliable clue to the legitimacy of the email.

101    I reject Westpac’s submission that it would be inappropriate and potentially misleading for the email to come from a Westpac sender email address or domain given the nature of an opt out notice as a communication from the Court. The opt out notice is not strictly a communication from the Court. It is a communication required by the FCA Act in a representative proceeding and is approved by the Court. Sections 33X and 33Y of the FCA Act regulate the giving of notices in representative proceedings. Those sections contemplate that notices will be given by one of the parties to the proceeding, but do not stipulate which party is to give the notice. Under s 33Y(3)(a), the Court must specify in its order who is to give the notice. For certain types of notices, opt out being one, it will not matter which party gives the notice or is perceived to give the notice.

102    In my view, the email address proposed by Westpac is likely to be regarded by many group members as spam or phishing and the email disregarded for that reason. It is far preferable that the email be sent with a domain name that is recognisable. It is regrettable that Westpac did not adduce evidence as to the legal difficulties associated with allowing a third party mailing house to use the Westpac domain name. Despite that, I consider that the legal issues involved may require further discussion between the parties. I will therefore make an order that the emails sending the opt out notices are to be sent from a ‘no reply’ email address to be agreed between the parties (in similar manner to the order concerning the mailing house). If the parties cannot reach agreement, they can apply to the Court to resolve the dispute.

Posting on Westpac’s internet banking platform

103    The applicant seeks an order for Westpac to upload the opt out notice to its internet banking platform of customers of Westpac in respect of whom the mailing house receives an email delivery failure notification for the opt out notice. Westpac opposes that order. It says that distributing the notice in that way would only reach a subset of group members (being Westpac’s current customers for whom it is most likely to have current contact details); the notice is most likely to come to an addressee’s attention if sent by the communication method for which the customer has previously indicated a preference; and such distribution is superfluous in circumstances where notice will be given by email or post.

104    I accept Westpac’s submissions. The additional order is directed to an unlikely scenario that an email sent to one of Westpac’s current customers, and in respect of whom Westpac has an email address, fails to deliver. In that unlikely event, the orders otherwise provide for the notice to be sent by prepaid post. I do not think that it is necessary to further complicate matters by imposing a third method of communication over Westpac’s internet banking platform.

Costs

105    Each of the parties have had a measure of success on the issues in dispute. Accordingly, I have ordered that costs be reserved.

Associate:

Dated:    29 September 2020