Change in Austrac-Westpac Justice presiding

An amended statement of claim would also require an amended defence from Westpac, delaying any trial if the parties are unable to reach a commercial settlement. Picture: David Clark

The Federal Court shootout between Austrac and Westpac over millions of anti-money laundering transgressions has taken an unexpected twist ahead of a scheduled case management hearing on Wednesday.

Jonathan Beach, who expressed strong views in 2018 about ASIC’s obligation to be a model litigant in the regulator’s partly successful unconscionable conduct case against Westpac, will now preside over the Austrac matter until its conclusion.

He replaces Chief Justice James Allsop.

Does this matter, if the law is supposed to be consistent no matter who applies it?

It might not matter at all.

But if you were in Austrac’s corner, you’d be well-advised to familiarise yourself with Justice Beach’s zero tolerance for regulatory overreach and strict interpretation of the model litigant convention.

After throwing out more serious charges of market manipulation against Westpac in May 2018, the judge found that the bank had engaged in unconscionable conduct under the ASIC Act through its involvement in setting the bank bill swap rate on three days between 2010 and 2012.

ASIC crashed into the model litigant problem when Justice Beach ruled that the regulator was reframing its case in the subsequent penalty hearing to inflate Westpac’s maximum penalty from $3.3m to $64m.

In a heated exchange, he berated ASIC for making submissions that were “wholly artificial” and “plainly ridiculous”.

When ASIC’s silk responded that Westpac’s arguments in the trial were an “affront” to the proper interpretation of the legislation, Justice Beach coolly reminded him of the commonwealth’s obligations as a model litigant.

“You shouldn’t use that language with me,” he scolded.

“You’re not in the (financial services) royal commission and you shouldn’t use that sort of inflammatory or exaggerated language.

“All the other flowery rhetoric I can do without.”

If there’s a lesson for regulators, it’s not to over-egg your case in pursuit of mountainous, exemplary penalties.

Loggerheads

In the Austrac case, the two parties remain at loggerheads, with Westpac providing $900m for a settlement and Austrac demanding $1.5bn.

Westpac, which has admitted the lion’s share of more than 23m transgressions, could also take heart from a case involving Commonwealth Bank earlier this month, also involving Justice Beach

As is often the case with computer glitches causing multiple contraventions, like in Austrac’s separate anti-money laundering battle with CBA in 2017, the penalty could have been stratospheric if the number of offences had simply been multiplied by the legislated penalty.

However, Justice Beach said that a respondent should not be sanctioned more than once for what was effectively a single episode of wrongdoing.

“It is appropriate to consider whether, and the extent to which, the contravening conduct should be regarded as a single course of conduct and penalised as one offence in relation to each category of contravention, on the principle that a contravener should not be penalised more than once for the same conduct,” he said.

The scales of justice have often tipped one way and then the other in Austrac’s case against Westpac.

Statement of claim ‘damning’

The regulator’s statement of claim was damning of the bank, saying there were systemic failures in the control environment, indifference by senior management and lack of oversight by the board.

The bank, however, acquired some negotiating leverage with its release of the Switkowski report on board governance, which said Austrac’s allegations included matters that were “unknown at the time” to Westpac’s leadership.

Then, last Friday, Westpac was forced to reveal it had sent further suspicious matter reports involving potential child exploitation to Austrac last December.

The trigger for the disclosure was Austrac informing the bank that it was further investigating the SMRs and it might need to lodge an amended statement of claim.

While the latest disclosures are serious, Westpac is already on the hook for similar transgressions.

Among the questions for Justice Beach on Wednesday is whether the new information is likely to significantly increase the penalty, or if it’s part of a single course of conduct.

An amended statement of claim would also require an amended defence from Westpac, delaying any trial if the parties are unable to reach a commercial settlement.

Chief Justice Allsop has already said that a trial should proceed sometime this summer.