Federal Court refuses amended statement of claim in FX cartel class action

The application for an amended statement of claim in the FX class action, which alleges cartel conduct by five investment banks, has been refused by the Federal Court of Australia.

This is a decision in the FX class action, which alleges that five investment banks – (1) UBS, (2) Barclay’s, (3) Citibank, (4) JP Morgan Chase and (5) NatWest (previously Royal Bank of Scotland (RBS)) – through their traders, engaged in cartel conduct in respect of the foreign exchange (FX) market. Claims were pleaded under the Trade Practices Act 1974 (Cth) (TPA) and the Competition and Consumer Act 2010 (Cth) (CCA). FX market participants purchase one currency in exchange for another currency. The alleged cartel conduct of the banks has been the subject of class action litigation overseas (the Overseas Proceedings), with three class actions in the United States and Canada reaching settlement/judgment (the Concluded Overseas Proceedings), with three other proceedings ongoing (the Extant Overseas Proceedings).

This decision concerned the applicant’s application for leave to file an amended statement of claim (PASOC). The applicant had previously been provided with a large set of discovery of almost 500,000 documents based on material produced by the respondents in the Overseas Proceedings, which was used to prepare the PASOC. The filing of the PASOC was opposed by all of the respondents, whose criticisms could be split into two main areas:

  • that the class member definition was inapt; and
  • that paragraphs alleging the contracts, arrangements and understandings (together, CAUs) which formed the basis of the allegations of cartel conduct were imprecise and gave rise to a “multitude of possibilities”, and that the inferential elements of the allegations did not satisfy the pleading requirements for the statutory causes of action.

Although Beach J had no difficulty with the class member definition, his Honour refused the applicant leave to replead in the form of the PASOC, in light of the criticisms in relation to the pleading of the cartel conduct.

Criticisms Regarding the Class Member Definition

The respondents’ criticisms of the class member definition could be further divided into two sub-criticisms. It was argued by the respondents that the class member definition, firstly, did not comply with s 33H(1)(a) of the Federal Court of Australia Act 1976 (Cth) (FCAA) as it was claimed that it did not readily allow for persons to be able to identify whether they were class members and, secondly, that it ought to exclude persons whose claims were the subject of the Overseas Proceedings, including the Extant Overseas Proceedings (the class member definition in the PASOC only excluded the Concluded Overseas Proceedings).

In relation to the first of those criticisms, his Honour noted (at [16]):

… the fact that inquiries might need to be made by a person who is uncertain of whether they are a group member does not deprive the description of objective criteria by reference to which membership can be established. And the fact that potential group members may need to make inquiries to ascertain whether they fall within the group definition does not render that definition inadequate for the purposes of s 33H(1)(a).

One of the respondents, UBS, proposed that the class member definition be limited to persons who were ordinarily resident in Australia. This was met with disapproval from his Honour who agreed with the applicant, noting (at [58]):

… there is no warrant for limiting the group to persons who were ordinarily resident or carrying on business in Australia. There are neither jurisdictional issues nor demonstrable group identification difficulties that necessarily require such a narrowing of the group definition.

His Honour further noted (at [59]) that where the Court had jurisdiction over a respondent and subject matter jurisdiction, the Court is empowered under Part IVA of the FCAA to determine the claims of an applicant and class members.

In relation to the second of the two criticisms, UBS argued that the class member definition should exclude persons who were pursuing materially similar claims against the respondents in the Extant Overseas Proceedings. UBS had sought to rely on the Full Court’s decision in Perera v GetSwift Ltd (2018) 263 FCR 92; [2018] FCAFC 202 (GetSwift) and Bell P’s decision in Wigmans v AMP Ltd (2019) 373 ALR 323; [2019] NSWCA 243 (Wigmans). However, his Honour did not consider that the reasons in GetSwift and Wigmans were apposite, noting that both those proceedings concerned competing class actions all of which were within Australian courts, rather than the situation in the case before him where the claimed ‘duplication’ was with the Extant Overseas Proceedings. His Honour considered that it was premature to exclude persons because they were class members in the Extant Overseas Proceedings, noting (at [83]):

… if any group member is the subject of any release in a foreign proceeding, that can ultimately be pleaded in bar at an appropriate time before me (or someone else) when any s 33R issue arises. Further, if any group member is the subject of a judicial determination in a foreign proceeding, then the relevant issue estoppel may be pleaded at an appropriate time.

Criticisms As To the Pleading of the Cartel Conduct

The second strand of criticism to the PASOC was akin to a strike out application, with the respondents submitting “… that the PASOC fail[ed] to disclose a reasonable cause of action, is likely to cause prejudice, embarrassment or delay and is otherwise defective …” and that the PASOC contained “a forest of forensic contingencies”. The respondents argued that the PASOC did not give them fair notice of the case that they would meet at trial and made it extremely difficult, if not impossible, to plead to. The respondents claimed that the PASOC did not set out how many CAUs there were and between which respondents each CAU existed. Each of the criticisms in this regard is set out at [105]-[112] of his Honour’s reasons.

His Honour was critical of the approach adopted by the applicant in pleading a series of alternatives, holding (at [116]):

Now it is for the applicant to clearly identify the case which it seeks to make, and this may require facts or characterisations of facts to be pleaded in the alternative. But it does not extend to planting a forest of forensic contingencies and waiting until final addresses to map a path through it.

The applicant argued that due to the nature of the cartel claims there was a significant information asymmetry and (as acknowledged by his Honour at [119]) that “… the case may be substantially based on inferences reasonably available to be drawn from the overt acts of one or more parties done in pursuance of such an alleged [CAU]”.

His Honour noted that both the TPA and CCA require that each CAU needed to be identified and its purpose and effect needed to be to lessen competition. The applicant alleged in the PASOC that each respondent had made an ‘umbrella understanding’ which formed the basis of the cartel arrangement (details of which are set out at [133]-[148] of his Honour’s reasons) and augmented by further CAUs. The respondents claimed that framing the case in this way meant that the pleading was impermissibly vague.

His Honour agreed with the respondents, holding that although there was information asymmetry, it was not an excuse for a pleading that was not cogent (at [162]). His Honour was critical of the use of an omnibus paragraph to describe the umbrella understandings, stating (at [169]):

… the number of permutations and combinations is enormous such as to make the pleas vague and uncertain and my case management of the proceeding and the trial potentially unworkable. Now such an omnibus paragraph may desirably cover all possibilities and contingencies so far as the applicant is concerned, but that does not provide any necessary justification.

Following the receipt of discovery, the applicant prepared a series of schedules to the PASOC setting out a series of chatroom transcripts which were the basis of the particulars for the CAUs. Criticisms were raised by the respondents to this format, arguing that the particulars were insufficient to support the CAUs alleged against each respondent. This criticism was accepted by his Honour, who held that the applicant could not ‘roll up’ the particulars for all the respondents and should instead provide each respondent a separate set of particulars to support the allegations against that respondent (at [200]-[201]).

Although the applicant was refused leave to file the PASOC, it was granted discovery of additional materials so as to be able to plead how each of the respondents ‘gave effect’ to the CAUs (a necessary element of the causes of action alleged).

Criticisms were also levelled against the applicant relating to its loss and causation plea, with his Honour ruling (at [311]) that “… even at the present time the applicant should properly articulate at least the structural elements of its causation and loss and damage case”.

Case details

J Wisbey & Associates Pty Ltd v UBS AG [2021] FCA 36

Federal Court of Australia, Beach J;
29 January 2021;
Plaintiffs’ Solicitors: Maurice Blackburn;
First Defendant’s (UBS) Solicitors: Herbert Smith Freehills;
Second Defendant’s (Barclay’s Bank) Solicitors: Clayton Utz;
Third Defendant’s (Citibank N.A.) Solicitors: Allens;
Fourth Defendant’s (JP Morgan Chase Bank N.A.) Solicitors: Allen & Overy;
Fifth Defendant’s (NatWest Markets PLC) Solicitors: King & Wood Mallesons;
Plaintiffs’ Funder: N/A;

Austlii link: Accessible here

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