About 10 investors and investor group spokesperson John Strahl attended the High Court at Wellington today for a chambers hearing. It was also attended by ANZ's chief legal counsel in New Zealand, David Bricklebank, and litigation funder LPF Group.
Justice Jillian Mallon has allowed media to report from chambers but has agreed to non-publication orders over ANZ emails which are before the court.
Neil Campbell, ANZ's Queen's Counsel, said in his opening that there was a lack of clarity in the investor group's allegations. The lawyer noted the bank rejects the allegations and had filed a detailed defence already.
The investors claim that ANZ knew that certain payments misapplied RAM client funds, and therefore the bank dishonestly assisted RAM's breaches of trust, benefitted from charging fees and interest through RAM's misused overdraft, and breached a duty of care in negligence.
From 2007, ANZ allowed a RAM bank account known as the '00' account to go into unauthorised overdraft more than 100 times, according to the claim.
The investors say an honest and reasonable banker with ANZ's knowledge would have known it was dishonest to use client funds from one account to clear the overdraft in another account.
Campbell spent much of this morning discussing case law around what the elements of the claim might be. Central to the case will be what the bankers knew or thought, and the legal concept of "willful blindness."
Campbell said a two-stage test must be applied, with the first limb testing what actual knowledge the bankers might have had, and the second considering what a reasonable banker would have done with that knowledge from an objective view.
The bank's lawyer also claimed that, even if there was a mismatch in funds, there could have been legitimate reasons for payments coming out of RAM's client fund.
"It's perfectly explainable that private funds held on trust for clients are going to be paid out or valid for reasons, which may include payment to RAM clients," he told the court.
Justice Mallon asked what other "innocent explanations" there might be, to which Campbell added that the payments could have been for RAM's fees.
Campbell said it was too broad for the investors to claim ANZ as an organisation knew this or that, and that they should be identifying which individual ANZ bankers or executives were at fault.
The judge said that the plaintiffs' position was that further discovery was needed to identify these persons.
Campbell said this contention was not accepted because the documents disclosed to the investor group's representatives by the Financial Markets Authority were comprehensive and unredacted.
Justice Mallon also asked what ANZ's duty might be to its own customers who invested in RAM. The judge said this wasn't part of the claim, but that as one of the country's largest banks, ANZ must have had customers who were RAM investors. The judge said while that wasn't part of the claim it was worth teasing out.
Campbell responded that the liability might be negligent misstatement, but stressed "that's not what we have here."
"What we have here is another example of somebody acting in breach of trust and the allegation that the defendant participated in that breach of trust and because the plaintiffs don't want to satisfy the dishonest test they are going for a lower standard which is being roundly rejected."
The proceeding continues with Stephen Hunter QC addressing the court next for ANZ. The preliminary hearing is set for two days, and Justin Smith QC is representing the investors.
The claim has been a long time coming, as the Financial Markets Authority had to fight the bank for the disclosure of documents which have helped form the case. The FMA was finally able to give the documents to investors in April last year.
The case is being funded by LPF Group. Under their deal, the litigation funder takes 25 per cent if it settles before July, and 30 per cent thereafter. More than 500 investors have signed up.
