Bhagat v Burns Philip & Company Limited

[1992] HCATrans 147

.~

~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M12 of 1992

B e t w e e n -

HAR! BHAGAT

Applicant

and

BURNS PHILP & COMPANY LIMITED

First Respondent

and

PRIESTLEY & MORRIS

Second Respondents

Application for special leave

to appeal ·

MASON CJ

Bhagat 1 8/5/92

BRENNAN J

McHUGH J.

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 8 MAY 1992, AT 10.51 AM

Copyright in the High Court of Australia

MR R. MERKEL. QC: If the Court pleases, I appear with my

learned friend, MR G.J. DAVIES, on behalf of the

applicant. (instructed by Read Kelly)

MR T.F. BATHURST, QC: If the Court pleases, I appear with

my learned friend, MR P.J. JOPLING, for the first

respondent. (instructed by Freehill Hollingdale &

Page.

MR T.J. NORTH: If the Court pleases, I appear for the

second respondent. (instructed by Ebsworth &

Ebsworth)

MASON CJ:	Mr Merkel.
MR MERKEL:	If the Court pleases, the decision of the Full Court in the present case overrules two long-established but interrelated lines of
authority that have been acted upon by the courts
since 1847, certainly in the United Kingdom until Aiden's case in 1986, but also in Australia and
Canada until the decision of the Full Court in this
case.

The two lines of authority were, firstly, that

the jurisdiction of a court to grant relief which
included orders as to costs could only be made

against or in favour of parties to a proceeding.

Whilst it is true there were some exceptions, they

were within a very narrow compass but the general

rule prevailed. The second line was that there was

no jurisdiction to make orders for costs against
represented persons in representative actions.

The first question was the subject of the grant of special leave in this Court in Knight's

case on 26 June 1991 and was argued before a

Full Court on 4 February and, indeed, I think the Full Court's judgment in the present case was	handed down only two or three days before the
hearing. But in the course of argument before the
Court, I think Your Honour Mr Justice McHugh raised
the question with counsel for the respondent of
whether the matter before the Court raised the
question of whether the long-standing practice in respect of not ordering costs against represented
persons would itself be overruled by the
submissions of counsel in that case, namely, that the Court follow Aiden's case, and counsel said it
would.

We seek special leave to raise both issues but

specifically the question of whether the court has

jurisdiction to make costs orders against

represented persons. There are three areas of law

in Australia that are affected by the decision of

Bhagat 2 8/5/92

the Full Court. The first relates to the general

jurisdiction of the courts to order costs against

non-parties, and in that sense section 24 of the apart from its counterparts in other States and,

indeed, for the Federal Court and, indeed, under

the Judiciary Act for this Court. The question as

broadly framed in Aiden's case seems to be one of

general application throughout Australia.

BRENNAN J: But this is all hypothetical, is it not,

Mr Merkel?

MR MERKEL:  It was not hypothetical, Your Honour, in this

case because what in fact occurred in the present
case, and it was very much a live issue between

parties on both sides of the record, was that the

applicant had sued on behalf of a class and that

class had - they were all Estate Mortgage unit

holders. They had all contributed to a fund for the

purposes of these proceedings but the basis upon

which their contribution was made and their consent

given to join in as represented persons in a class

action was that they, by doing so, would not be

rendering themselves liable for costs.

The issue arose in the court in this way:

the first group of represented persons identified

in the statement of claim had consented to be

represented persons but had sought leave of the

court to withdraw, and that leave was granted and

on the order granting the leave, the question arose

as to whether the additional parties, namely, the 20,000 or more other persons who had consented to be parties could be joined as parties, their

consent being given on the basis that they were not

liable for costs.

It was put by counsel on behalf of the

auditors, Priestley and Morris, that those consents

were not valid consents because they were
conditional.	It was put that the condition was one

which was satisfied because the court had no

jurisdiction to make orders against represented

persons whilst they were being represented and not
parties as to costs, so that far from being

hypothetical, whether this action was able to stand

as a class action on the pleadings, namely, whether

the consents referred to in the pleadings were the

consents required by section 34, and whether there

would be a class action at all, was critically

dependent upon the determination of this issue, and

it is for that reasons that the auditors sought to

raise it in its summons as an issue for

determination by the court. The applicant, at the

same time, sought to raise that issue for

Bhagat 3 8/5/92

determination by the court, and His Honour

Mr Justice Smith determined that question.

So that we say that true it is there was no moment at that point of time for such an order to

be made because an application had not been made,
but the very existence at the outset of the action

and its very ability to continue was dependent upon

the answer to that question, because there would be

no members of the class who had consented to be

joined if the consent was conditional. So, we say

it arose in that sense and was a very real question

sought to be determined by both parties on both

sides of the record.

I have outlined the first area of law that this case covers. The second area of law is that,

of course, the rules of court in respect of

representative actions are substantially the same

throughout the country and, as I indicated, since

1847, until the decision of the Full Court in this

case, those rules have been acted upon on the basis

that the represented persons were not liable for

costs and that there was no jurisdiction in a court

to make a cost order against them.

Now, the Full Court in the present case found

that the decisions that have been relied upon under

those representative action rules of court were

altered by the statutory provisions considered in

Aiden's case and the statutory provision in

section 24 and its counterparts in each State

giving the court the broadest of discretion as to

who cost orders could be made against. So that the

effect of the decision is to overrule that line of

authority since 1847. It has been acted upon and

never doubted, in any decision that we are aware

of, until raised by the Full Court.

Indeed, one wonders whether, when

Their Lordships were considering this point in

Aiden's case, they had turned their mind to how far-reaching the ramifications of the decision in

Aiden's case, in fact, would be.

The third area of law which is raised directly

by this decision relates to class actions. There

are counterparts, admittedly not in the same terms,

to the Victorian provisions, both now under the

amendments to the Federal Court Act which came into

operation earlier this year where there is an

ability for class actions, and also in the South

Australian rules of court and, of course, the whole notion of class actions is evolving as a further

development of representative actions.

Bhagat 4 8/5/92

Indeed, in the debate in the Federal

Parliament on the Federal Court Act, one of the

members of Parliament raised the question of why

the Act is silent on costs and foreshadowed that,

"Unless that matter is dealt with, it looks like it

may end up having to be determined in the High

Court." But we say that the issue on class actions and the liability of represented persons for costs is a question that necessarily underlies the very existence of a class action because its sole

purpose and function, as far as represented persons

are concerned, is to not put themselves, in effect,

deeper in the hole that brought them to the court

in the first place by rendering them liable for

costs.

If that be wrong, then it is a matter that

must be addressed by the legislature and we say

that the very supposition stemming from the
evolution of class actions from representative

actions is that the represented persons would not

be liable for costs and that class actions were an

expedient way of giving a wider access to justice
in the community and to the community. So, we say

those three questions, which have broad

application, are directly raised by the decision of

the Full Court in this case.

We would submit that it would be unfortunate

if the argument before this Court in Knight's case
dealing with the question of a receiver's liability
for costs, without consideration of the distinct

and important issues arising in respect of

representative or class actions, were determined

without the court, in effect, hearing argument on

this discrete but interdependent aspect of the

question arising in Aiden's case.

The Full Court followed Aiden's case - that is

clear at application book page 171 - and did

expressly hold that cases applying the rule in	respect of representative parties were wrongly
decided because they had not given consideration
and effect to the alteration to the costs legislation in the respective jurisdictions which
had the effect of non-parties being liable for
costs. That appears quite clearly at the
application book at pages 174 and 177.

The error, in our submission, which arises

within the Full Court judgment, and we say by
process of reasoning with respect to
Their Lordships in Aiden's case, is that

Their Honours in the Full Court did not give proper

or adequate weight to the reasoning for the

development for the two rules, and that reasoning

stems from - - -

Bhagat 8/5/92

MASON CJ:  You need not trouble us on this aspect of the case, Mr Merkel. We are prepared to assume that

you have an arguable case on the question of

substance.

MR MERKEL:	Your Honours, we really say that if that be the question, then this is an appropriate case for the
grant of special leave.  The only additional
question that arose in the present case is a matter
that arose only in the Full Court and that was
whether this was a matter that could properly be determined by the trial judge as a preliminary
question in the course of the proceedings. Their Honours, in effect, took the point up
themselves.  I should say that no party had taken
it before His Honour Mr Justice Smith and no party had taken it in the Full Court, but when Their Honours queried whether it was appropriate or
within jurisdiction to make such a declaratory
order, it was raised by Their Honours, then counsel for Burns Philp, who had never taken the point before, amended their notice of appeal to raise the question of jurisdiction.

We say that that was wrongly decided by

Their Honours. There are two sources of

jurisdiction to determine such a question. The

first is under Order 47 rule 4 of the Rules of Court which enabled the court to determine any

question arising in a proceeding.	The rule
provides that:

The Court may order that -

any question in a proceeding be tried before,

at or after the trial of the proceeding, and

may state the question or give directions as

to the manner in which it shall be stated -

and a question is given the widest of definitions

in the interpretation section which is Order 1.13.

"Question" is defined as meaning:

any question, issue or matter for
determination by the Court, whether of fact or

law or of fact and law, raised by the

pleadings or otherwise at any stage of a

proceeding by the Court -

so that a question in a proceeding may arise in the

pleadings or otherwise. We would submit that

Their Honours took an extraordinarily narrow and

unduly restrictive view.

MASON CJ: That is a possible view but, after all, it is a

matter of practice and procedure involving the

power of the court to determine a question under

Bhagat 6 8/5/92

the rules. Now, that normally is not the sort of matter in respect of which this Court would grant special leave to appeal. It is a matter which we

would normally regard as lying within the province

of the supreme court itself.

MR MERKEL:  Yes. Of course that is so, Your Honour. The

oddity would be that if that were so, and this
question could never be determined until trial, one

would have the absurdity of a class action being

presented to the court in a case such as the
present, which would be as large and vast a class

action with as many class members as one could imagine, with the class members unable to have determined the fundamental jurisdiction question of

whether they were liable for costs until the end of the trial, and the very rationale for them entering into the class action is based upon them taking
what they perceive to be the benefit of the

provisions of the rules.

MASON CJ: True, but as you have already said, this matter,

generally speaking, lies in the legislative arena

at this time. Now, no doubt it entails a number of

problems and they are essentially problems which

the legislatures will have to sort out.

MR MERKEL: With respect, Your Honour, that, we would say,

representative actions and every

begs the question because the ramifications of the dealing with

statute dealing with class actions. We say that

if, as Your Honour has asked me to assume, that the

question is one that is reasonably open to

argument, then we would submit that it would not

serve the interests of justice for the legislature

to have to deal with a question that may have been

wrongly decided when the matter is, in effect,

before this Court already in Knight's case, but not

with respect to the question of representative

orders which more sharply raise the question the

Court has considered in Knight's case because,

unlike the problem of receivers, there was an

established common law principle acted upon over a

long period of time which we would say a court

would give great weight to in the interpretation of

section 24 and its counterparts in other

jurisdictions.

We would say it is not serving the interests

of justice for this Court to allow a decision that
is questionable to stand, saying to every
legislature in the country and every rule-making

authority in the country, "Well, you must work out

whether this decision is right or wrong",

particularly when it is a decision that only is

binding in the State of Victoria.

Bhagat	8/5/92
BRENNAN J:	Has the judgment in Forest v Keen Bay Pty Ltd

got anything to say to the present problem?

MR MERKEL: That, Your Honour, was the decision that I think

Your Honour was a member of the Court that granted

special leave on and that became Knight's case

which was argued before the Full Court in February

and I think Your Honour was not a member of that

Court. So that this Court is currently considering

the very question in that case but by reference to the less certain practice of receivers and whether they are liable for costs as a non-party.

McHUGH J:  The other point of distinction is that Queensland

does not have the equivalent to section 24 or

section 5 of the 1890 English Act.

MR MERKEL:  Its wording is different, Your Honour, but as I

understood the argument in Knight's case, the

combination of the statutory provision and Order 91

really raised the same question as Aiden's case.

Aiden's case has a counterpart which is almost

identical - - -

McHUGH J:	It depends on how you construe it but Order 91 of the Queensland Rules does not have the words "by
whom" in it.

MR MERKEL: That is so, Your Honour. But there is a

decision of this Court which we say would give

great weight to - - -

McHUGH J: What is that, Wentworth?

MR MERKEL:  That is Wentworth where the New South Wales

statutory provision was being considered and this

Court, in a joint judgment of Their Honours the

then Chief Justice Sir Harry Gibbs and Your Honour
then Justice Mason and then Justices Brennan, Deane

and Dawson, assumed and found expressly that "by

whom" and "to whom" implicitly carried the

limitation by which party or to which party costs

were to be paid, and we say -

McHUGH J: A lot of the relevant cases were not cited to the

Court in Wentworth.

MR MERKEL:	I accept that, Your Honour, and all I can say is that that case, by a judgment of the Full Court of
this Court, only lends greater weight to the
underlying assumption that we say the legislature can be taken to have made when enacting section 5 or section 24. We do not say it is determinative but we say it is reinforcing of our central point,
and we say it would be unfortunate, putting it very
gently, if legislatures and rule-making authorities
were to accept and act upon the Full Court decision
Bhagat	8/5/92

and turn their minds to this question, which would

substantially undermine the utility of actions that

have been so longstanding and having benefit if, in

fact, that was the wrong decision.

We are particularly cognizant of the fact that

Knight's case did not raise it as directly as our

case, and Your Honour, with respect, has given me
an added reason for saying the Court should

consider this case because the Victorian statutory

provision is one that, if anything, is more in line

with those that are applicable in New South Wales

and several of the other States because the wording

of "by whom" and "to whom" is picked up in Victoria

and the other legislative provisions.

McHUGH J:  The Victorian provision follows the legislation

in Canada and England.

MR MERKEL: Yes, Your Honour. Aiden's case does stand alone

and even though His Honour Mr Justice Brooking was

correct, that one of the problems in many of the

decisions His Honour overruled, such as the

representative party actions, was that they had not

referred or considered the other line of authority

such as the section 5, Aiden's case line of

authority. We make the same criticism of Aiden's

case. Aiden's case, likewise, did not consider the

ramifications and the longstanding rules such as

Scott v Pascall and Mr Justice Eve, and the, long

line of decisions in representative actions which

were being, in effect, swept aside.

So, we say that there is nothing hypothetical

about the manner in which this question arose. We

say the decision of the Full Court to say that it

had not arisen was demonstrably wrong when one

looks at the terms of the rules of court and also,

it was hardly a point of merit because it was never

sought to be raised by any of the parties, it was a

court point, but yet the court went on to decide

the substantive point in such a far-reaching way.

So that we say it would be most unfortunate if

this Court, in effect, dealt with Knight's case

without considering the kind of discrete but more

important and more wide-ranging questions that

arise on the appeal that we are seeking leave for.

MASON CJ: Yes, Mr Bathurst?

MR BATHURST: If the Court pleases. These proceedings, in

our submission, do not affect any persons'

substantive rights or liabilities. The issue, in fact, is whether potential representative parties

could be potentially liable for costs. The only

persons at the present time who could conceivably

Bhagat 9 8/5/92

be affected by a reversal of the Full Court's

decision are the persons who were originally named

in the statement of claim as represented parties.

Those persons have been given leave to withdraw

from the proceedings and no order for costs has

been sought against them.

BRENNAN J: But is there an application to join others who

have given a conditional consent?

MR BATHURST:  There is an application to join other parties

who have given - there has been an application
which was granted by Mr Justice Smith to join other

parties who have given a conditional consent but

their rights are only affected by the fact at this

stage that they have imposed the condition they can

still join in these proceedings. All it means is

they cannot join in the proceedings or will not join in the proceedings on the terms which they

sought to impose.

In those circumstances, they are, in our

respectful submission, in no different position to

a person who has not yet given a consent, for

example, but who is sitting by waiting to see what

happens today and depending what happens today, he

may or may not seek to join in the proceedings.

But that would not be enough, in our respectful

submission, to make the question involved in this

case other than purely hypothetical.

Secondly, irrespective of whether the

Full Court raised the question of the effect of

rule 47, the fact is, in our respectful submission,

that the court having decided the case on the

construction of rule 47, anything it said in

relation to the other question is obiter.	It may
be persuasive.	The persuasive effect of it may

well also be influenced by what this Court says in Keen Bay - in Knight's case, but it will not arise

in the case unless and until this Court considers

whether it should interfere with what I might call

the primary basis for the decision and that is the

construction of rule 47.

As Your Honour the Chief Justice, in argument,

pointed out, that is a matter of practice and
procedure regarding the court's rules and is a

matter with which this Court would not normally

interfere, and it is our submission that this case

is not an appropriate case to interfere for that

reason also.

Your Honours, we further submit that the Full Court was correct in its construction of

rule 47. Rule 47 appears in that part of the rules

relating to mode of trial and is, we submit,

Bhagat 10 8/5/92

plainly directed to separate questions at issue

between the parties.

MASON CJ: Would you just point out the page in the

application book where the rule is set out?

MR BATHURST:  It is not, unfortunately, Your Honour. May I

hand the Court copies of the rule and also the

definition provisions in the rule. I am told by Mr Merkel, correctly, that the rule itself is at

page 145.	The rule, as Your Honours will see,
refers to:

any question in a proceeding be tried before,

at or after the trial of the proceeding -

and gives the court power to make directions.	It
further provides that:

different questions be tried at different

times or places or by different modes of

trial.

The definition of "proceeding", which is in rule 1, relates to:

any matter in the Court commenced by writ or

originating motion or as otherwise provided -

whilst the definition of "question" is:

any question ..... raised by the pleadings or

otherwise at any stage of a proceeding by the

Court, by any party or by any person not a

party who has a sufficient interest.

It is our submission that those proceedings

are directed to a separate determination of issues

between the parties, not what we say is involved in

this case, giving potential litigants advice as to

the liability for costs if they in fact join in.	If, as we submit is the case, the Full Court was
correct in its construction of rule 47, the
question sought to be agitated by my learned friend
in this appeal simply will not arise for decision.

Your Honours, we do not propose to submit to

the Court that the questions raised by my learned friend are not ones of general importance, nor do

we submit that there is not a substantial argument

so far as section 24 is concerned, but what we say

is, because of the matters that we have raised,

this case is not an appropriate vehicle for a

consideration of those issues.

BRENNAN J: Could those issues ever reach this Court except

by a procedure of this kind?

Bhagat 11 8/5/92

MR BATHURST:  They would reach this Court if, in a

representative proceedings, an order for costs was

made.

BRENNAN J:	In other words, those who seek to be joined in representative proceedings must do so on the basis
that they may be liable for costs and then challenge that at the end of the day if they fail?

MR BATHURST: That is so, and that is the way that Knight's

case came to this Court. There was an order for

costs against the receiver from which he appealed.

BRENNAN J:  What is the position, though, of a person who,

seeking to be joined as a party to these

proceedings on the condition thus far imposed, has

his or her application refused on the basis that

the condition cannot be satisfied?

MR BATHURST:  If that was the case there may be a

substantive issue which could come before this

Court. The question then would be the question of

whether their consent was adequate for the purpose

of section 35 of the Victorian Supreme Court Act.

BRENNAN J:	And has that been decided?
MR BATHURST:	That has not been decided. What has been

decided, in effect, by Mr Justice Smith was that

the consents were adequate as a consequence of his

finding that representative parties would not be

liable for costs. The Full Court simply dismissed

the summonses brought by the applicant and by the

second respondent. So, that question has not been

decided either by a court at first instance or by

the Full Court.

BRENNAN J:  I obviously have not followed the procedure

properly.	Was there an application made by the
settler of the deed to have parties removed from

the action and to have other parties joined?

MR BATHURST:  Yes.

BRENNAN J: That summons has been determined?

MR BATHURST: There were two separate summonses. There was

a summons to have parties removed. That was

determined in favour of the applicant, and those

parties were removed and there was no objection to

that by any parties. The second summons which was

brought was, in effect, the summons for a

declaration that representative parties be not

liable for costs.	The form of the summons appears
at page 121 of the application book.	The orders
sought were, firstly:

Bhagat 12 8/5/92

Does the Court have jurisdiction to order the costs of any of the Defendants to be paid by all or any of the persons represented -

and, secondly, were certain consents sufficient for the purpose of section 35 of the Supreme Court Act?

Then, to question 2:

In the event that the Court determines the

answer to the question set out in

paragraph l(a) hereof in the negative, the

Plaintiff be given leave to represent the unit
holders named in paragraph 16 of the said

Affidavit of Dennis John Millikan in this

action.

Now, order l(b) sought - prayer l(b) of the summons

did not relate to the unit holders who had given
conditional consent. They related to unit holders
whose consent did not include the consent to bring

an action against Burns Philp & Co Limited, the

first respondent in these proceedings. No

objection was taken to the form of consent by the

respondents before Mr Justice Smith. So, in that

convoluted way, the answer to Your Honour

Justice Brennan's question is, "No, the question

has not been determined."

BRENNAN J: If question l(b) were determined as against the

sufficiency of the consents, was any subsequent

order flowing from that?

MR BATHURST:  No. The orders appear at page 135. The first

question was answered:

No, so long as the persons represented remain

represented persons.

The second question was answered by His Honour,

"Yes." And then leave was granted to the unit

holders, who were the unit holders referred to in

paragraph 2, to become represented in the
proceedings subject to them showing that they had

standing by virtue of being unit holders.

So, the way the summons was framed made it -

it was, as it were, a conditional application,

conditional upon the first question being answered

favourable to the applicant. So, the question of

the adequacy of the consent in terms simply did not

arise.

As I indicated before, we do not seek to argue

in the present case that the questions sought to be

agitated are not arguable, but we would submit

this, that when one looks at section 35 of the

Bhagat 13 8/5/92

Supreme Court Act, these proceedings are far

removed from representative actions of a

traditional type. Section 35, in effect,

provides - sorry, more accurately, section 34,

provides that:

where three or more persons have the right to

the same or substantially the same relief

against the same -

persons, they can join in a representative action:

whether or not all rights to relief are in

respect of or arise out of the same

transaction or series of transactions.

In the present case, the sections have been used by the representative persons to mount, in

addition to claims for breach of trust or claims

for breach of fiduciary duties, individual claims

which each of them have or say they have against

the first respondent arising out of the Trade

Practices Act, arising under prospective provisions

of the Companies Code, and the representations and

the prospectuses are different in relation to each

of the various unit holders.

What one has is, as it were, a common strand

and then the unit holders joining together to bring their individual claim for damages, accepting as we

do that that is allowed by the sections. These

sections are so removed, in our submission, from

the traditional representative-type actions to make
the line of authority referred to by my learned

friend irrelevant in determining the question.

In those circumstances, it is our submission

that the questions that my learned friend seeks to

agitate will, in all probability, be determined one

way or the other by the decision of this Court in

Keen Bay. For those reasons, in our respectful

submission, leave should be refused.

MASON CJ: Yes, Mr North?

MR NORTH:	If Your Honours please, it is the contention of the second respondent that the Court ought to look
primarily at the particular statutory framework of
this type of representative procedure. What the
applicant seeks to do here is to indicate that
there is a general rule of law which applies in
all types of representative proceedings. But in
respect of this particular type of representative
proceeding, it will be seen that sections 34 and 35 of the Supreme Court Act is a unique type of
proceeding. It is unique in this fashion, that in
order to determine those persons who participate in

Bhagat 14 8/5/92

the proceeding, one must look to the consent which
all persons who seek to be represented must, before

the commencement of the proceeding, have consented in writing to being represented at the time of the

proceeding actually being commenced and must be

named in the process by which that proceeding is

commenced.

Other forms of representative proceedings determine the class in a general description of

that class. They do not determine the class by

reference to those persons who are willing

participants. The Full Court decision is, with

respect, a decision which is right when one can

assess sections 34 and 35 of their own and, in

particular, I refer the Court to what the

Full Court judgment states at page 157 when looking

at the particular nature of section 34 and

section 35, in that the Full Court specifically had

regard to the way in which a person becomes a

participant in this proceeding and seeks to take

the benefit of the proceeding themselves.

In the paragraph which begins at about

line 16, the judgment states that:

I think there is a good deal to be said

for the view that, quite apart from the effect
of s.5 of the Judicature Act 1890, the
procedure required by s.35 of the Supreme

Court Act 1986 is such as to bring represented

persons within the power of the Court to

require payment of costs. They are all,

having regard to s.34, persons having a right

to relief, and this relief may include

damages, which may be individually assessed.

They must have consented in writing to being

represented and, leaving aside s.35(4) -

which is the application for leave to join -

they must be named in the originating process

and their written consents must be filed in

the Court. Persons who under s.34(4) become
represented by leave after the commencement of
the proceeding must also consent in writing;

the sub-section does not expressly require

that these consents be filed, nor does it

expressly require that the originating

process -

to be named.

It is a matter, when one considers this type of representative proceeding which, in my

submission, the Court is unique, that there is no

special point of importance other than the

Bhagat 15 8/5/92

operations of sections 34 and 35. When one

considers the basis of the claim made against the

twelfth-named defendant, the second respondent,

which is simply a claim for negligence by unit

holders and a claim for damages, it is, with

respect, a correct determination by the Full Court

to say that those persons who seek the relief and are entitled to come before the Court and to seek

by proof, and evidence would be required as to

reliance and also that they in fact suffered some loss and damage, that there should be a potential

liability for costs.

In so far as the general question as to jurisdiction is concerned, that matter has been the

subject-matter of a determination with special

leave being granted in the Keen Bay decision. The

real point of this appeal is the application of

sections 34 and 35 and whether or not there is, in

this type of legislative scheme, any ability for

persons who are represented to be liable for costs.

It is submitted that the conclusion reached by the

Full Court is undoubtedly right in the way and

manner in which these people actually participate

in the proceeding and are named on the record.

The final point which I wish to make to the

Court is this, that this matter is one of a

separate legislative framework and in that instance

there is no matter of general importance other than
the issue of how section 34 and section 35 is

interpreted in the State of Victoria only.	When
one considers this in comparison with the
amendments to the Federal Court Rules, it is

submitted that there is a distinct difference. In

this proceeding, one, as is generally described,

must opt in in other legislative enactments in

respect of representative proceedings - - -

McHUGH J: But does not the scope of sections 34 and 35

depend upon the construction you give to

section 24?

MR NORTH:  With respect, no, because a plaintiff or a party

to a proceeding is defined by the Supreme Court Act as to include a person who not only is named in the record but attends upon the proceeding. So, there

is a general definition of "party" in my

submission. These represented persons are named on

the record before the court and are attendees and

participate in the proceeding itself.

So, to take an illustration: if, after five

days of hearing in respect of one unit holder only,

it was determined that that person, in fact, did

not own units, it may be that all the rest of the

persons who were represented should not have to

Bhagat 16 8/5/92

bear any question of costs, but for the respondent

who had to agitate those issues, it would be unfair

to leave the matter where there would be, as sought
to be urged to the Court here, a general rule of

policy that a represented person is immune from

costs. In my submission, in this legislative
enactment, a represented person is clearly liable

for costs. Those are the matters, if Your Honours

please.

MASON CJ: Thank you, Mr North. Yes, Mr Merkel?

MR MERKEL:  The only matter I wish to raise relates to some

matters my learned friend, Mr Bathurst, indicated to the Court. At page 121 the questions asked of

His Honour Mr Justice Smith were set out and

question 2, which was to operate on the withdrawal of the original represented persons, made it clear

that the action would only continue as a class

action if the leave was granted as sought in the

second matter raised in the summons, and that was

only an application based upon there being no

liability for costs, that is, a negative answer to

question l(a). His Honour did, in fact, grant that
negative answer and, as a consequence, granted
leave to the persons who had signed consents

conditional upon no liability for costs being

granted. That appears at page 135 where
His Honour's orders are set out, and paragraph 2:

His Honour granted the leave sought because the

answer to the first question, that is l(a), was in

the negative.

Their Honours, in the Full Court, at page 179,

at line 8, said:

The correct answer to each of those questions

was a simple affirmative.

That is the question asked by Priestley & Morris

and the plaintiffs, because each party needed an
answer to that question to determine whether the

proceeding was one that was validly able to be

continued as a class action, and that question was

a question that arose directly on the pleadings at

page 2 in paragraphs 2 and 3. So that we submit

that far from the matter being hypothetical, the

matter was one that related to an issue arising on

the pleadings, an issue that was going to determine

whether the action was one that would be dismissed

at that point or continue as a class action.

We would submit that what my learned friends

have suggested, that this question could only come
before the court after an order has actually been
made, would leave a state of unacceptable

uncertainty in this area of the law which, we

Bhagat 17 8/5/92

submit, can be removed if the leave sought is

granted.

BRENNAN J: But the difficulty you face, Mr Merkel, is that

you have not got an order which actually refuses an

application, have you, to be represented?

MR MERKEL:  No, Your Honour, but that - - -

BRENNAN J: And it is because of that that you run into the

47.04 point?

MR MERKEL:  Yes. Your Honour, the way it would arise

hereafter, and it may be purely as a result of the

limited leave granted by the Full Court, His Honour

Mr Justice Smith granted leave for the additional

persons to be joined as represented persons because

their condition was satisfied and their consent was

therefore unconditional.

Our learned friends sought leave to appeal

from that decision of the Full Court and the issue

of importance that the Full Court granted leave for
and the only issue was the question of cost as a

question of law. Now that that question has been

answered in the affirmative, this matter would go

back to Mr Justice Smith. He, having to act now on

the basis of the answer given by the Full Court,

would have to withdraw the leave granted. Then we

would have an order of the kind Your Honour has

made and we would then be back here.

Now, if that were the basis upon which we had

to come back, we would ask for this to be adjourned

because that really is only a matter of going back

to His Honour, asking His Honour, as His Honour
would have to, to withdraw the leave and then we

would come back to this Court, saying, "We now have

an order which gives effect to the decision of the

Full Court which we would ask leave to appeal

from".

BRENNAN J:  It would not be an adjournment because your

application here is from the order of the Full

Court which seems to have preoccupied itself with problems of procedure under 47.04. That, though no doubt an interesting exercise for the Full Court,

is something which is quite unattractive to this

Court.

MR MERKEL:	Your Honour, I understand that, although the Full Court, unfortunately, went on and dealt with
the substantive question and we would submit that
to subject the unit holders to, in effect, having to go back to His Honour and then ask for leave to
appeal from His Honour's decision, because there
would, in fact, be an order based upon the ruling

Bhagat 18 8/5/92

of the Full Court, is a rather circular route to

getting a question of law that is able to be

determined. But, we would submit, if it were that

procedural matter that were the hurdle, we would

ask for this application to be adjourned to enable

that application to be made to His Honour because

to do otherwise would, in effect, result in a

rather large waste of costs, duplication of

material, all at the expense of unit holders who

are seeking, in effect, to be heard in respect of

claims they have resulting from the collapse of

Estate Mortgage. If the Court pleases.

MASON CJ:  The question of jurisdiction to order costs

against a represented person is an important one,

but the decision of the Full Court is both

interlocutory and hypothetical in the sense that

the question will only arise for ultimate decision

in the present case if the action is determined

against the plaintiff.

It would not be appropriate to grant special

leave to consider the question at this stage of the

litigation in the absence of an order refusing an

application to be represented made on behalf of the

person whose consent was conditional on that

person's immunity for costs.

That being so, it would be inappropriate to

grant special leave to appeal in relation to the

scope of the Supreme Court's jurisdiction to

determine, a "question in a proceeding" under

rule 47.04 of the Supreme Court Rules. The

application for special leave to appeal is

therefore refused.

I should say, in response to the concluding

remarks of Mr Merkel in his address in reply, that

there are, of course, ways in which costs can be

minimized in the event that the applicant manages

to get the proceedings in a state in which there is
an order from which an appeal can be taken.	If a

subsequent application for special leave to appeal

were to be made to this Court, it would be possible

to take advantage of the materials already filed.

There would be no need to duplicate them.

MR BATHURST:	We would seek costs, if Your Honour pleases.
MASON CJ:	What do you say about costs, Mr Merkel?
MR MERKEL:	They are hard to resist, Your Honour, but we do

say the point was one that really was raised by the

Full Court, that we came here acknowledging that

that was the point raised by the Full Court.

Bhagat 19 8/5/92

MASON CJ:  The application is refused with costs.

MR BATHURST: If the Court pleases.

AT 11.42 AM THE MATTER WAS ADJOURNED SINE DIE

Bhagat 20 8/5/92