Bogan v The Estate of Peter John Smedley (Deceased) (No 3)
[2023] VSC 103
•7 March 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST
S ECI 2020 03281
| ANTHONY BOGAN | Plaintiffs |
| MICHAEL THOMAS WALTON | |
| v | |
| THE ESTATE OF PETER JOHN SMEDLEY (DECEASED) & ORS | Defendants |
| (according to the attached schedule) |
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JUDGE: | Nichols J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Determined on the papers |
DATE OF JUDGMENT: | 7 March 2023 |
CASE MAY BE CITED AS: | Bogan v The Estate of Peter John Smedley (Deceased) (No 3) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 103 |
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PRACTICE AND PROCEDURE — Group proceeding — Reservation of questions in a proceeding for consideration of the Court of Appeal — Where group costs order made — Where extant transfer application raises significant questions of law in respect of the group costs order — Where no right of appeal from dismissal of transfer application — Corporations Act 2001 (Cth) ss 1337H, 1337P, 1337R; Supreme Court Act 1986 (Vic) ss 17B(2), 33ZDA — Questions reserved.
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WRITTEN SUBMISSIONS: | Counsel | Solicitors |
| For the Plaintiffs | Mr SH Hartford-Davis Mr MO Pulsford | Banton Group |
| For the Fifth Defendant | Mr P Herzfeld SC Ms J Roy Mr J Wherrett | Ashurst |
HER HONOUR:
This group proceeding is brought on behalf of shareholders who acquired an interest in fully paid ordinary shares in ASX-listed Arrium Limited between August 2014 and April 2016. It is alleged that during that period Arrium’s financial accounts did not give a true and fair view of its financial position and performance or comply with Australian accounting standards, and that Arrium’s directors and its auditor, KPMG, made misleading statements of opinion supporting the reports. The plaintiffs claim that they and group members have suffered loss as a result of that conduct by acquiring shares at a substantially greater price than their true value or the price that would have prevailed, absent the conduct.
The fifth defendant, KPMG, seeks an order under s 17B(2) of the Supreme Court Act 1986 (Vic) reserving certain questions for consideration of the Court of Appeal.
I will reserve the following questions:
Question 1
In exercising the discretion to transfer proceedings to another court under s 1337H(2) of the Corporations Act 2001 (Cth), is the fact that the Supreme Court of Victoria has made a group costs order under s 33ZDA of the Supreme Court Act 1986 (Vic) relevant?
Question 2
If the proceedings are transferred to the Supreme Court of New South Wales:
(a)will the GCO made by the Supreme Court of Victoria on 3 May 2022 remain in force and be capable of being enforced by the Supreme Court of New South Wales, subject to any order of that Court; and
(b)if the GCO will remain in force, does the Supreme Court of New South Wales have power to vary or revoke the GCO?
Question 3
Should this proceeding (S ECI 2020 03281) be transferred to the Supreme Court of New South Wales pursuant to s 1337H of the Corporations Act 2001 (Cth), as sought in prayer 3 of the summons filed by the fifth defendant on 26 February 2021?
Briefly stated, my reasons for doing so are as follows.
Questions 1 and 2
KPMG has sought an order transferring this proceeding to New South Wales under s 1337H(2) of the Corporations Act 2001 (Cth). This Court has made a group costs order (or GCO) under s 33ZDA of the Supreme Court Act, on the application of the plaintiffs.[1]KPMG submits that its transfer application gives rise to a question of general importance as to whether a group costs order is properly characterised as a procedural advantage for the purpose of applying cross-vesting laws (as that term is used in BHP Billiton v Schultz[2]) and if so, whether the making of such an order is relevant for that purpose.
[1]Bogan v The Estate of Peter John Smedley (Deceased) [2022] VSC 201 (Bogan GCO Judgment). Section 33ZDA provides that
(1)on application by the plaintiff in any group proceeding, the Court, if satisfied that it is appropriate or necessary to ensure that justice is done in the proceeding, may make an order—
(a) that the legal costs payable to the law practice representing the plaintiff and group members be calculated as a percentage of the amount of any award or settlement that may be recovered in the proceeding, being the percentage set out in the order; and
(b) that liability for payment of the legal costs must be shared among the plaintiff and all group members.
(2) If a group costs order is made—
(a) the law practice representing the plaintiff and group members is liable to pay any costs payable to the defendant in the proceeding; and
(b) the law practice representing the plaintiff and group members must give any security for the costs of the defendant in the proceeding that the Court may order the plaintiff to give.
(3) The Court, by order during the course of the proceeding, may amend a group costs order, including, but not limited to, amendment of any percentage ordered under subsection (1)(a).
(4) This section has effect despite anything to the contrary in the Legal Profession Uniform Law (Victoria).
(5) In this section—
group costs order means an order made under subsection (1);
legal costs has the same meaning as in the Legal Profession Uniform Law (Victoria).
The section was introduced into pt 4A of the Supreme Court Act on 1 July 2020. It has been considered in several decisions of this Court since that time: see Fox v Westpac Banking Corporation [2021] VSC 573; Fox v Westpac Banking Corporation (No 2) [2023] VSC 95; Allen v G8 Education Ltd [2022] VSC 32; Bogan GCO Judgment [2022] VSC 201; Nelson v Beach Energy [2022] VSC 424; Lay v Nuix Ltd [2022] VSC 479; Gehrke v Noumi Ltd [2022] VSC 672; Mumford v EML Payments Ltd [2022] VSC 750; Lieberman v Crown Resorts Ltd [2022] VSC 787. No other Australian state has enacted equivalent legislation.
[2]BHP Billiton Ltd v Shultz (2004) 221 CLR 400 (Schultz). KPMG also identified other questions which it characterised as being of general importance, as noted below. The fundamental questions raised by the transfer application are questions 1 and 2.
The first question, it submits, will require consideration of whether the factors to which a court may permissibly have regard in identifying the “more appropriate court” for the litigation of a proceeding are broader for the purposes of s 1317H(2) (which confers a discretionary power) than they are for the purposes of the Jurisdiction of Courts (Cross-vesting) Acts (which confer power that must be exercised where the criteria for transfer are met).[3] It will also entail consideration of the correctness of several first instance decisions characterising procedural advantages to a plaintiff as relevant to the transfer application,[4] which KPMG will submit are inconsistent with BHP Billiton Ltd v Schultz.[5]
[3]See s 5 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic) and its cognates.
[4]KPMG cites Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335, [18]–[19] (Debelle J), citing Dawson v Baker (1994) 120 ACTR 11, 25 (Higgins J, Gallop J agreeing); Rushleigh Services Pty Ltd v Forge Group Ltd (in liq) [2016] FCA 1471, [77] (Foster J); President’s Club Ltd v Palmer Coolum Resort Pty Ltd [2019] QSC 209, [154]–[157] (Wilson J), citing World Firefighters Games Brisbane v World Firefighters Games Western Australia Inc (2001) 161 FLR 355, [32] (Philippides J). The plaintiffs will submit that none of those cases inappropriately treated procedural advantages to a plaintiffs as being determinative of a transfer application.
[5](2004) 221 CLR 400. KPMG described those issues themselves as being of general importance.
KPMG will contend that the making of a GCO is not relevant in the exercise of discretion under s 1337H(2), either generally or in this case. The plaintiffs will contend that forensic advantages or detriments to one party may be taken into account in this context, provided that the disadvantage to the opposite party is not “corresponding and commensurate”.[6] They will submit that a litigant’s access to justice to prosecute an arguable claim is not commensurate with, and may trump, the interest of the defendant in the termination of a claim against it without adjudication on the merits. They will say that without the benefit of the group costs order made in their favour, they will be unable to prosecute their case.[7]
[6]See Schultz (2004) 221 CLR 400, 422 [16].
[7]In so submitting, the plaintiffs will rely upon findings made in support of the Court’s decision to grant a group costs order (Bogan GCO Judgment), from which judgment there was no appeal.
The second question arises because KPMG wishes to contend that, even if the existence of a GCO might permissibly be taken into account in the exercise of discretion on the transfer question, it should be assessed as a neutral factor because it is capable of being enforced by the Supreme Court of New South Wales, subject to any order of that Court.[8] The plaintiffs will submit that that proposition is highly contestable.
[8]KPMG will rely upon Corporations Act s 1337P(2). KPMG submits that this question is of general importance.
An appeal does not lie from a decision of a court “in relation to a transfer of a proceeding” under s 1337H.[9]
[9]Corporations Act s 1337R.
The parties have agreed a statement of facts. Among other things, the statement sets out, as propositions of fact, the relevant findings made in the judgment of this Court granting the plaintiffs a group costs order. I am satisfied that by reason of the agreed statement there will be no contested evidence on the consideration of the questions by the Court of Appeal.
The plaintiffs’ position was that they neither consented to nor opposed KPMG’s application for the reservation of certain questions, but wished the application to be dealt with expeditiously. That position changed when the questions were re-formulated, and the plaintiffs now oppose the application unless question 3 is also reserved. That issue is addressed below. The other defendants neither consent to nor oppose the application.
It is well established that there is no single factor or combination of factors by reason of which a question will be appropriate for consideration by the Court of Appeal and that the proper exercise of discretion to reserve a question must be guided by the circumstances of the case. The difficulty of the question to be determined, its importance to the parties or the public, the existence of a conflict in authorities, and the inevitability of appeal from whatever decision is made at first instance are relevant but not determinative factors.[10] The presence of any or all of them does not confer on the parties a “passport” to the Court of Appeal.[11] An important factor tending against the grant of leave is that the process would involve determination of an issue by the appellate court without the advantage of that issue having been defined and considered at first instance.[12]
[10]Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2014) 45 VR 571, 574 [18] (Maxwell P, Neave, Redlich and Beach JJA and Kaye AJA) (CFMEU v Boral).
[11]Collins v Black [1995] 1 VR 409, 411; De Simone v Bevnol Constructions and Developments Pty Ltd [2010] VSCA 231, [38].
[12]CFMEU v Boral (2014) 45 VR 571, 574 [18].
By and large, the consideration of whether to transfer a proceeding to another state superior court calls for a “nuts and bolts” management decision as opposed to an application of “textured principle” to the facts.[13] However, there are certain cases where such a decision will or might be informed by questions of principle. Bankinvest AG v Seabrook,[14] which concerned the first contested application under Jurisdiction of Courts (Cross-vesting) Act1987 (NSW) for the transfer of proceedings from one state superior court to another, was such a case. The fact that the case was the first of its kind, in respect of a uniform state and federal scheme, and that there would be no appeal from an order made under the Act by a single judge (as a result of which, important questions would not receive appellate consideration), persuaded Rodgers J to refer the application to the Court of Appeal.[15] In Wileypark v AMP,[16] four representative proceedings had been commenced against AMP Ltd in the Federal Court of Australia. AMP subsequently sought to have those proceedings removed to the New South Wales Supreme Court under s 1337H of the Corporations Act.[17] Chief Justice Allsopp considered that the interlocutory applications were of sufficient importance to direct that they be determined by the Full Court.[18] Among relevant considerations were that no appeal lies from a decision under s 1337H,[19] and that the transfer was opposed on arguments raising questions of principle.[20]
[13]Bankinvest AG v Seabrook (1988) 14 NSWLR 711, 714 (Street CJ) (Bankinvest).
[14]Bankinvest (1988) 14 NSWLR 711.
[15]See ibid 717–18.
[16]Wileypark Pty Ltd v AMP Ltd (2018) 265 FCR 1.
[17]See ibid 4 [1]–[4].
[18]Ibid 9 [21].
[19]Ibid 9 [21], 15 [53].
[20]Ibid 9 [21], 10–12 [26]–[35].
These cases are mentioned only by way of illustration, recalling that the appropriate exercise of discretion will turn on the circumstances of the instant case. However, to summarise the approach commonly taken by courts in this context, an absence of an avenue of appeal will not by itself, divorced from other considerations, justify the reservation of a question for the Court of Appeal. Whether or not an appeal lies reflects a legislative choice (at least in this case). Want of an avenue of appeal may, however, particularly when present with other factors such as the presence of significant questions of law, support the reservation of a question for appellate consideration. Where an avenue of appeal is open, it will militate strongly in favour of refusal to reserve a question.[21]
[21]For the latter proposition, see De Simone v Bevnol Constructions and Developments Pty Ltd (2010) 30 VR 200, 209–10 [39]–[40].
I accept that the questions 1 and 2 arise in this proceeding. I am inclined to the view that question 1 is a question of general importance. As to question 2, as KPMG correctly observes, a single judge of the New South Wales Supreme Court would be bound by a decision of the Victorian Court of Appeal unless persuaded it was clearly wrong[22] but would not be bound by the decision of a single judge. The question is of real importance to the parties, for that reason.
[22] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151–2 [135]; Gett v Tabet (2009) 254 ALR 504, 565–6 [294]–[295]; Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168, 171–4 [13]–[19].
In the circumstances, a number of the characteristics identified in the authorities as being commonly relevant to an exercise of discretion reserving a question are present in respect of questions 1 and 2, and clear disentitling factors (factual contest, avenues of appeal not taken) are absent.
Question 3
More needs be said about question 3. Brief reference to the procedural history of the application is necessary.
Before approaching the Court, KPMG formulated two questions for reservation to the Court of Appeal, which took the form of the present question 3 and a similarly expressed alternative (but without questions 1 or 2).[23] The plaintiffs informed KPMG that they neither consented to nor opposed the application. KPMG then applied for the reservation of its questions. I directed that KPMG put on short submissions in support of this application. Having considered those submissions, I listed the matter for mention where I indicated to the parties that I considered that the appropriate course was to reserve for consideration what I consider to be the underlying questions raised by KPMG’s application, rather than to formulate as questions what appeared, in effect, to amount to a referral of the application itself to the Court of Appeal.
[23]The alternative question was expressed as, “whether to make the order sought in KPMG’s summons”.
I indicated that I intended to reserve questions that were in substance those now set out as questions 1 and 2. KPMG had submitted that the question it had formulated fell within the ambit of s 17B of the Supreme Court Act but did not object to that course, and KPMG’s Senior Counsel, who appeared at the mention, said that it posed no difficulty. The plaintiffs submitted that what is now question 3 should also be reserved for the Court of Appeal. The basis of the submission was that without that question the transfer application would be bifurcated, causing delay.
I directed the parties to re-formulate question 2.[24] The parties then communicated with my chambers as directed, submitting questions 1 and 2, which KPMG described as the questions that it sought to have reserved for the Court of Appeal.
[24]For completeness, it is noted that KPMG’s submissions had identified, as questions of importance, the subsidiary issues described in paragraph 6 of these reasons. They had also identified, as a question of general importance, “the appropriateness of the procedural course adopted in this case, of determining the GCO application before the transfer application”. As I indicated in discussion with the parties, that did not appear to be a question suitable for reservation. The procedural course adopted was not the subject of an interlocutory appeal. It does not appear to raise a question of principle. KPMG submitted on that question that there was no utility in determining the GCO application and characterised the issue as one of efficiency.
The parties’ email also advised that the plaintiffs position was now that they opposed those questions being reserved unless question 3 was also reserved. It was stated that the plaintiffs were taking that position because proceeding without question 3 would create unnecessary delay, requiring the application to be dealt with in two phases. It added that:
(a) That is not the process that was followed in Bankinvest and Wileypark, where the New South Wales Supreme Court and the Federal Court, respectively, referred the relevant applications to the appeal court;
(b) it may be thought that the second question is hypothetical unless the Court of Appeal is also seized with the transfer application; and
(c) it will create particular complexity if either party seeks special leave or to refer the matter to the High Court, as the High Court might consider the Court of Appeal’s reasons an inappropriate vehicle in the absence of a determination on the facts.
Those contentions were not supported by submissions, and no leave was sought to make further submissions. KPMG indicated that it consented to the third question being reserved, but otherwise took no position on the matters raised by the plaintiffs. The other defendants took no position.
In the circumstances, I will not embark upon a comprehensive consideration of the issues that might have been raised by submissions. Some brief remarks will suffice. That the courts in two earlier cases referred the transfer applications in those proceedings to their respective courts of appeal is plainly not determinative of what should occur on this application. It appears that question 2 will arise if the answer to question 1 is “yes”, in which case the determination of that question will bear on whether KPMG is entitled to the relief it seeks.[25] The plaintiffs’ third point appears to understand the purpose of the reservation of a question to the Court of Appeal as a staging point en route to the High Court.[26] The plaintiffs’ real point is that if question 3 is reserved, it will be unnecessary for the matter to return to the trial division, thereby saving time and allowing the proceeding to progress more quickly.[27]
[25]See Hodgson v State of Victoria, [1995] 2 VR 292, 296 (Tadgell J), applied in McLeod-Dryden v Supreme Court of Victoria [2017] VSCA 60, [16].
[26]See Collins v Black [1995] 1 VR 409, 410–11.
[27]In May 2022, KPMG made an application to remove the whole of the proceedings to the High Court under s 40(2) of the Judiciary Act 1903 (Cth). The parties were advised that the matter would be re-listed for case management directions promptly after the resolution of the removal application. The application was refused on 18 November 2022. KPMG filed a summons seeking orders under s 17B of the Supreme Court Act on 22 December 2022 and submissions in support in February 2023.
I have formed the view that, in the circumstances, the third question should be reserved in order for the Court of Appeal to consider, with the benefit of the issue exposed in this way, whether to grant leave in respect of questions 1, 2 and 3, or any of them.
Because of the manner in which the issue has been approached by the parties, I have reached that view not without hesitation. KPMG and the plaintiffs agreed between them the formulation of questions that would serve each of their objectives. Evidently, the plaintiffs committed themselves to not contesting the application but only on the proviso that the whole application could be determined by the Court of Appeal. The compromise, as it were, was not exposed in submissions and the outcome appears to have been assumed. That outcome being imperilled, the plaintiffs have changed their position.
Mindful of the injunction of Brooking J not to place undue reliance on the urgings of the parties,[28] I have reserved the third question because, taking a wholistic view of the proceeding, I think it likely that any alternative course will lead to further disputation about this process, consuming the resources of both the litigants and the Court. I have done so in circumstances in which consideration of the third question will not require the resolution of factual disputes (because of the effect of the agreed statement of facts), and the answers to questions 1 and 2 will likely be significant in the disposition of the application as a whole.
[28]See Collins v Black [1995] 1 VR 409, 410–11.
SCHEDULE
BETWEEN
ANTHONY BOGAN
First Plaintiff
and
MICHAEL THOMAS WALTON
Second Plaintiff
and
THE ESTATE OF PETER JOHN SMEDLEY (DECEASED)
First Defendant
and
ANDREW GERARD ROBERTS
Second Defendant
and
PETER GRAEME NANKERVIS
Third Defendant
and
JEREMY CHARLES ROY MAYCOCK
Fourth Defendant
and
KPMG (A FIRM) ABN 51 194 660 183
Fifth Defendant
1
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