Australia and New Zealand Banking Group Limited v ANZCover Insurance Pty Ltd (No 5) [2006] VSC 38 (17 February 2006)

Last Updated: 2 March 2006

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 2073 of 2003

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)	Plaintiff
v
ANZCOVER INSURANCE PTY LTD (ACN 082 275 125) & ORS	Defendants

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 January, 8 February 2006
DATE OF JUDGMENT:	17 February 2006
CASE MAY BE CITED AS:	Australia and New Zealand Banking Group Limited v ANZCover Insurance Pty Ltd (No.5)
MEDIUM NEUTRAL CITATION:	[2006] VSC 38

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PRACTICE AND PROCEDURE - Adjournment of trial – Late delivery of witness statement – Whether refusal of adjournment would cause injustice to defendants.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.J. Myers QC with Ms C. Kenny	Clayton Utz
For the Defendants	Mr J.H. Karkar QC with Ms Wendy Harris	Ebsworth & Ebsworth

HIS HONOUR:

1 On 8 February 2006 I acceded to the application of the defendants ("the insurers") in this proceeding that the trial be adjourned. These are my reasons.

2 The adjournment application arises from the fact and the content of a witness statement of Manoj Kumar Rakshit filed and served late – on 20 December 2005. The insurers complained that this raises fresh issues and that it means that the trial, which was to commence on 6 February cannot now be conducted. They applied by summons filed on 13 January to the Practice Court judge seeking an order that the plaintiff, ANZ Banking Group ("ANZ") be prevented from relying upon the evidence of Mr Rakshit, alternatively that the trial date be vacated. This application was dismissed with costs without prejudice to the rights of the insurers to renew it before me as trial judge.

3 I heard the application on 30 January and adjourned it for further argument after the case had been opened. I refer to my reasons given on that occasion.^[1] The application was renewed as an application to exclude the evidence of Mr Rakshit, alternatively to adjourn the trial after the openings were concluded and the first witness had been called.

4 The claim of ANZ is for indemnity under a Bankers Blanket Bond Insurance Policy. The amount at stake is substantial: the statement of claim seeks $130,000,000 plus interest. Under the policy, the indemnity is available for loss or damage sustained or liability incurred by the assured by reason of it having acted upon cheques which were fraudulently raised or fraudulently presented or by reason of the assured’s legal liability to third parties or any third party claim for damages for loss caused by the negligent act committed or alleged to have been committed by the assured.^[2]

5 The claim under the policy arises out of the dealing by the ANZ Grindlays Bank ("Grindlays"), a subsidiary of ANZ, with nine cheques drawn in early 1992 by National Housing Bank of India ("NHB") upon the Reserve Bank of India in favour of Grindlays.

6 The proceeds of the cheques were paid to one Harshad Mehta, a Bombay stockbroker. All the events occurred in India. Following the failure of Mr Mehta, two banks, NHB and Grindlays, fell into dispute as to who should bear the loss of the full value of the cheques, INR 506 crores approximately.

7 In the event the banks resolved this dispute by a settlement reached in 2000. Under this settlement the sum in question, together with interest, was divided between them with the sum of approximately INR 1,025 crores being payable to NHB and approximately INR 600 crores to Grindlays. The former sum, I am told, is the equivalent of about $A300M. This is a figure well in excess of the limit of available cover under the policy so that the amount claimed in this proceeding is $130,000,000, being that limit.

8 One of the issues in this case depended upon the assertion of the insurers that ANZ had to prove that the loss was by reason of the fraudulent raising or presentation of the cheques or that it was by reason of the liability of Grindlays to a third party for loss caused by its negligence.

9 As I mentioned in my earlier reasons, this proof of ANZ was pleaded in paragraphs 42 and 44 of its statement of claim in a very oblique way. The insurers sought particulars and the response was unhelpful. ANZ, surprisingly, sought particulars from the insurers as to the basis of their denial of fraud or negligence. Correspondence between the parties then proceeded, generally, as if it lay upon the insurers to disprove these matters. Furthermore, in its statement of claim, paras 73A and 73B, ANZ still does not accept that it is obliged to prove these matters.

10 It is nevertheless clear that these issues of fraud and liability for negligence are live issues in the proceeding. Accordingly, it was accepted by counsel for the insurers that the proposed evidence of Mr Rakshit was relevant to an issue. I assume also that his evidence as appears in the witness statement is admissible.

11 The question here is how ANZ intended to deal with this issue. In June 2004 witness statements were ordered to be filed and served by 3 September 2004. These were to stand as evidence-in-chief of the witnesses. I have not read these witness statements but I have been told by counsel for ANZ that they contain nothing which proved fraud or liability for negligence. It may be that the plaintiff took the position that it did not bear the burden of proving this.

12 In August 2005 a fourth amended statement of claim was delivered. This included paragraphs 73A and 73B in which the occurrence of the insuring events was alleged. In the particulars given under these paragraphs, ANZ says that the liability of Grindlays to NHB was established by:

(i) the Reserve Bank of India directive of 7 October 1992 that Grindlays pay the sum in question to NHB; or

(ii) the Special Court judgment of 2 February 1998; or

(iii) An undertaking given of behalf of Grindlays on 17 April 1997.

Further, the particulars given state that ANZ intends to rely upon certain findings of the Special Court in a judgment given on 27 April 2005. This was a judgment in a criminal proceeding against two former employees of NHB for conspiracy. There is some controversy between the parties as to whether any or all of these facts would be admissible to prove the fraud or liability in negligence.

13 On 5 August 2005 I ordered that any further witness statements be delivered by 14 October 2005. The parties then agreed between themselves to do this on 25 November and this was done. At this point it was reasonable for the insurers to understand that they had the evidence-in-chief of all witnesses to be called by ANZ. None of this evidence was directed to establishing the fraud or liability for negligence, proof of which the insurers contended lay on ANZ.

14 I have mentioned in my earlier judgment the circumstances in which the Rakshit witness statement came to be delivered on 20 December 2005. It is fair to say that no prior warning of its import was given. No explanation for the timing of its delivery has been offered to me other than that Mr Rakshit was not interviewed until after the judgment of the Special Court was handed down in April 2005.

15 Counsel for ANZ frankly accepted that nothing in their client’s witness statements, other than the proposed evidence of Mr Rakshit, went to the proof of the fact of the fraud. In these circumstances, the filing of the Rakshit witness statements represents a change in attitude of ANZ to the issues in the case. I accept that, prior to the receipt of this witness statement, the insurers were entitled on material before them to make the forensic decision not to present a case on that issue which ANZ apparently did not intend to prove.

16 Counsel for ANZ pointed out that, while the witness statement was late, it was only some four weeks late since the parties had agreed to extend the time for delivery to 28 November. I accept that this is so. It means, perhaps, that had the statement been delivered by the agreed date, the insurers' application would face difficulties. In such an event they would have had about 10 weeks to meet the allegations. But this is not the case.

17 Further, it was put on behalf of ANZ that the issues as to fraud and liability for negligence were well worked over in India in the decade before this proceeding commenced. Counsel added to this the fact that most, if not all, of the documents produced through Mr Rakshit were exhibited to the criminal proceeding in India or in the arbitration. Accepting this to be so, the fact remains that, until 20 December 2005, the insurers were entitled to ignore these matters and not to trouble themselves with these documents. They were also free of the burden of trawling through the voluminous documents produced since 1992 to see what might be relevant to these issues and what might assist them.

18 I am persuaded that it would not be reasonable to impose this burden upon them as the trial moved forward. I have no evidence from the insurers as to their preparedness to meet these pleaded allegations when the witness statements were first delivered. I was and remain troubled by their apparent lack of activity on the part immediately following the receipt of the witness statement in question. I mentioned this as a matter of concern on 30 January and, since that date, some steps have been taken.

19 In the circumstances, I will not prevent ANZ from calling Mr Rakshit on an issue joined in the pleadings. I accept that the trial can not in justice to the insurers proceed as planned. I have determined to give to them some time to ready themselves to meet this evidence, if they are so advised.

20 Since the case is part-heard before me it will be resumed before me as trial judge. Since the trial will involve witnesses from overseas it is desirable that it be adjourned to a firm date on which I am available. As I indicated to counsel this would not, in the ordinary course, be until February 2008. This is an unacceptable delay given that interest is running at $1M per month. I will therefore reorganise my schedule for this year so that I may resume the trial on 24 April. This will allow the parties nine weeks for the trial which will finish by 23 June when I have other commitments.

21 The trial was therefore adjourned to 24 April 2005 with costs thrown away to be borne by ANZ.

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CERTIFICATE

I certify that this and the 4 preceding pages are a true copy of the reasons for Judgment of Byrne J of the Supreme Court of Victoria delivered on 17 February 2006.

DATED this 17 day of February 2006.

Ha Tran

Associate to Justice Byrne

^[1] [2006] VSC 21.

^[2] The above is a summary of the relevant provisions of the insuring clauses of the policy so far as is here relevant.