Camping Warehouse Australia Pty Limited v Downer EDI Limited
[2015] VSC 555
•13 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2014 01423
BETWEEN
| CAMPING WAREHOUSE AUSTRALIA PTY LIMITED (FORMERLY MOUNTAIN BUGGY AUSTRALIA PTY LIMITED) | Plaintiff |
| and | |
| DOWNER EDI LIMITED (ACN 003 872 848) | Defendant |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 September 2015 |
DATE OF JUDGMENT: | 13 October 2015 |
CASE MAY BE CITED AS: | Camping Warehouse Australia Pty Limited v Downer EDI Limited |
MEDIUM NEUTRAL CITATION: | [2015] VSC 555 |
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PRACTICE AND PROCEDURE – Group proceedings – Whether opt-out notice should be approved – Whether opt-out notice apt to mislead – Sections 33X and 33Y of Supreme Court Act 1986 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N J O’Bryan SC with Mr M W L Symons | Elliott Legal |
| For the Defendant | Mr G L Meehan with Mr M P Guthrie | Colin Biggers & Paisley |
| For Naratelle Pty Ltd (by leave) | Dr O Bigos | Slater & Gordon |
| For IMF Bentham Ltd (by | Mr M B J Lee SC | William Roberts Lawyers |
leave)
HIS HONOUR:
This is a group proceeding commenced by the Plaintiff on its own behalf and on behalf of all persons who acquired shares in the Defendant on or after 12 January 2010, who were, at the commencement of trading on 1 June 2010, holders of any of those shares and who have claims for loss and damage caused by the conduct of the Defendant, in the period 12 January 2010 to 31 May 2010, as alleged in the Further Amended Statement of Claim.
The conduct of the Defendant referred to relates to alleged breaches of the Defendant’s continuous disclosure obligations under s 674 of the Corporations Act 2001 (Cth) and the alleged misleading or deceptive conduct of the Defendant. The precise allegations are not relevant for the purposes of this application.
Section 33J(1) of the Supreme Court Act 1986 requires the Court to fix a date before which a group member may opt out of a group proceeding. Pursuant to s 33Y the Court must approve the form and content of the opt-out notice required by s 33X. Both the Plaintiff and the Defendant have put forward proposed opt-out notices for approval.
I will assume familiarity with my previous judgments dealing with various interlocutory matters.[1] As pointed out in Judgment No 1,[2] a number of members of the Defendant participated in an earlier funded proposed class action which was compromised before proceedings were commenced (‘the IMF Settlement’). The Defendant informed the Court that the IMF Settlement was confidential, including the names of the members bound by the settlement.
[1][2014] VSC 357 (Judgment No 1); [2015] VSC 122 (Judgment No 2).
[2]Judgment No 1 [26].
The nature and extent of the IMF Settlement and consequent further exposure of the Defendant are critical matters to the resolution of this application.
The Plaintiff’s proposed opt-out notice
The Plaintiff’s proposed opt-out notice (‘the Notice’) contains extensive reference to the IMF Settlement. It also suggests that there may be grounds to question the enforceability of the settlement, a matter that it is suggested may well be dealt with at trial.
The relevant parts of the Notice that are objected to are included in the paragraphs set out below —
D. Am I a Group Member?
You may have already entered into a settlement with Downer EDI in respect of part or all of your claim. Downer EDI made arrangements to settle with some Group Members who acquired shares in the period from 25 February 2010 and who continued to hold those shares at the commencement of trade on 1 June 2010. That settlement was announced to the ASX on 27 February 2014. Group Members that participated in that settlement entered into a funding agreement with IMF (Australia) Ltd and were represented by Slater & Gordon (IMF Settlement).
The Plaintiff’s legal team is reviewing the IMF Settlement to assess whether it was a legally effective settlement, in particular having regard to the fact that it was entered into outside the scheme of the legislation which governs class actions.
Even if you participated in the IMF Settlement you remain a Group Member in this proceeding. You may have an entitlement to compensation in this proceeding for a loss suffered by you if:
a.You purchased shares in Downer EDI in the period from 12 January 2010 to 24 February 2010 (i.e., before the period subject to the IMF Settlement); and/or
b.The enforceability of the IMF Settlement is successfully challenged in this proceeding.
3. Did you buy any shares in Downer EDI in the period from 25 February 2010 to 31 May 2010?
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4. Did you participate in a settlement agreement with Downer EDI in respect of which you entered into a funding agreement with IMF (Australia) Ltd and in which you were represented by Slater & Gordon (IMF Settlement)
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5. Of the shares you purchased in Downer EDI in the period from 12 January 2010 to 31 May 2010, did you purchases any of those shares in Downer EDI on behalf of another person (i.e., on behalf of a beneficiary)?
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6. You may be a Group Member
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8. You may be a Group Member
Whether you have suffered a loss will depend on the terms of the IMF Settlement and the terms of any judgment or settlement in this proceeding. It is also possible that the enforceability of the IMF Settlement may be challenged. In the event that the IMF Settlement is successfully challenged, you may be entitled to further damages in this proceeding and/or the refunding to you of fees paid to IMF (Australia) Ltd under the litigation funding agreement.
Therefore as you may have a further claim for loss and damage in this proceeding, you should seek legal advice independent of Slater & Gordon which is itself a party to the IMF Settlement, and is likely to be in a position of conflict as it has an interest in upholding the IMF Settlement, in deciding whether to opt-out of this proceeding.
13. Did you participate in a settlement agreement with Downer EDI in respect of which you entered into a funding agreement with IMF (Australia) Ltd and in which you were represented by Slater & Gordon (IMF Settlement).
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15. You may be a Group Member
Whether you have suffered a loss will depend on the terms of the IMF Settlement and the terms of any judgment or settlement in this proceeding. It is also possible that the enforceability of the IMF Settlement may be challenged. In the event that the IMF Settlement is successfully challenged, you may be entitled to further damages in this proceeding and/or the refunding to you of fees paid to IMF (Australia) Ltd under the litigation funding agreement.
Therefore as you may have a further claim for loss and damage in this proceeding, you should seek legal advice independent of Slater & Gordon which is itself a party to the IMF Settlement, and is likely to be in a position of conflict as it has an interest in upholding the IMF Settlement, in deciding whether to opt-out of this proceeding.
If you consider that you have a subsisting claim for loss and damage, or would like to discuss a possible challenge to the IMF Settlement, please write to [email protected] or by post to:
Mr Mark Elliot
Elliot Legal Pty Ltd
Solicitors for the Plaintiff
Downer EDI Shareholder Class Action
Level 2, 90 William Street
Melbourne VIC 3000
Submissions opposing the Plaintiff’s Notice
Naratell Pty Ltd (Naratell), a participant in the IMF Settlement and Benthan IMF Pty Ltd (IMF) the funder in the IMF Settlement, were given leave to make submissions. Together with the Defendant they submitted that the IMF Settlement was irrelevant and did not require any reference other than to point out to those that did settle may still be members of the class in this proceeding if they acquired shares between 12 January 2010 and 25 February 2010. Anything further, and in particular, the extensive references to the IMF Settlement and its enforceability, was both unnecessary and positively misleading.
There was no dispute as to the relevant principles applicable to opt-out notices. The principal purpose of an opt-out notice is to facilitate an informed decision by group members: Clarke v Great Southern Finance Pty Ltd;[3] King v GIO Australia Holdings Ltd.[4] The notice must not be misleading or convey a misleading impression, as that might well affect the decision of a group member whether or not to opt out of the proceedings: King v GIO.[5] The task of the Court when approving the form and content of a notice is to ensure that the notice, inter alia, sets forth information in a manner which is readily understandable and is not misleading: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 4).[6]
[3][2014] VSC 569, [25].
[4][2001] FCA 270, [15] (Full Federal Court).
[5]Ibid.
[6][2010] FCA 749, [23].
Those opposing the Plaintiff submitted that the Notice was misleading or apt to mislead in a number of respects.
The Notice clearly suggests that there may be a basis to challenge the IMF Settlement on the ground that it was “entered into outside the scheme of the legislation which governs class actions.” That, it was submitted, is incorrect and misleading or apt to mislead. There is no basis for such a challenge, and none has been identified. The IMF Settlement did not relate to a representative proceeding within the meaning of Part IVA of the Federal Court of Australia Act 1976 (Cth) (or the equivalent in this Court, Part 4A of the Supreme Court Act 1986 (Vic)). Rather, it related to a proposed representative proceeding, which was never commenced. Section 33A of the Federal Court of Australia Act states that “representative proceeding” means a proceeding commenced under section 33C of that Act and s 33A of the Supreme Court Act states that a “representative proceeding” means a proceeding commenced under Part 4A of that Act. The prohibition in s 33V of each of the Federal Court of Australia Act and the Supreme Court Act on settlement or discontinuance without the approval of the Court applies only to a “representative proceeding”, that is, one that has been commenced. In the absence of a proceeding commenced under s 33C, the requirements of s 33V cannot apply. Accordingly s 33V of both Acts does not, it was submitted, apply to the settlement of claims under the IMF Settlement. There is substance in this submission.
The Notice also suggests that every participant in the IMF Settlement remains a Group Member in this proceeding and may be entitled to recover a loss in this proceeding. That, it was submitted, is incorrect and misleading or apt to mislead.
The Group Member definition in the Plaintiff's Further Amended Statement of Claim covers persons who:
(a) acquired shares in Downer EDI Limited (Downer) between 12 January 2010 and 31 May 2010 (inclusive) (the Relevant Period); and
(b) were at the commencement of trading on 1 June 2010 , a holder of any of those shares; and
(c) have a claim for loss or damage caused by the conduct of Downer during the Relevant Period which is alleged in the plaintiff's Further Amended Statement of Claim.
The IMF Settlement related to a proposed proceeding which spanned the period 25 February 2010 to 31 May 2010 (inclusive). In order to participate in the IMF Settlement, a person was required to execute a standard-form release. The release executed by Naratell was disclosed to the Court.
By executing the standard-form document it was submitted (by reference to the Naratell release) that each participant in the IMF Settlement released:
Downer and any related body corporate (as that term is defined in the Corporations Act 2001 (Cth)) and their past or present directors, officers, servants and agents from all claims, suits, causes of action and demands whatsoever both at law or in equity which [the person executing the release] have, had or may have arising out of the purchase or acquisition of shares in Downer in the Relevant Period [being 25 February to 31 May 2010 (inclusive)].
The participants in the IMF Settlement, having executed releases in favour of the Defendant, no longer 'have [any] claim for loss or damage caused by the conduct of Downer during the Relevant Period which is alleged in the plaintiff's Further Amended Statement of Claim'. There is a narrow exception, given the difference in the way that the Relevant Period was expressed in the claim to which the IMF Settlement related (25 February to 31 May 2010) and the way the Relevant Period is expressed in this proceeding (12 January to 31 May 2010). Any claims in respect of shares which the participants acquired during the 6-week period between 12 January and 24 February 2010 are not caught by the releases.
Consequently each participant in the IMF Settlement has, it was submitted, released any claim which they might otherwise have been able to make against the Defendant arising out of the purchase or acquisition of shares during the period 25 February to 31 May 2010. Accordingly, each participant (unless it purchased shares in the earlier period of 12 January to 24 February 2010) is either not a Group Member in this proceeding, or to the extent it is a Group Member, it is barred from prosecuting any claim for loss and damage.
It was submitted further that contrary to the Plaintiff’s submissions, participants in the IMF Settlement have released any ‘further claim for damages in this proceeding’ which they would have had otherwise. It is incorrect and misleading for the Notice to state or suggest that the entitlement of all participants in the IMF Settlement to recover further compensation in the proceeding ‘will depend on the terms of the IMF Settlement and the terms of any judgment or settlement in this proceeding’. Unless a participant also acquired shares during the early period, it has released any claim the subject of the proceeding. There is substance in this submission.
Finally it was submitted that the Notice:
(a) criticises Slater & Gordon (the firm representing participants in the IMF Settlement), with an unsubstantiated allegation of a conflict of interest;
(b) seeks to promote the Plaintiff's solicitor, Mark Elliott of Elliott Legal;
(c) seeks to generate interest in, and support for, ‘a possible challenge to the IMF Settlement’, where such a challenge is foreign to the existing proceeding (as it is not found anywhere in the Further Amended Statement of Claim), and no basis exists or has been identified for such a ‘possible challenge’.
It was submitted none of these matters are proper matters for inclusion in an opt-out notice.
Plaintiff’s submissions
The Plaintiff submitted that there needed to be some reference to the IMF Settlement in order to avoid confusion. It was submitted in effect that it was not appropriate to exclude members of the IMF Settlement as not much was known of the settlement and that upon investigation and consideration it may not be enforceable thereby ipso facto making those members part of the class.
Consideration
In my opinion, and substantially for the reasons submitted, the Notice in its present form is apt to mislead and should not be sent out.
The IMF Settlement is not an issue in the proceeding. Its only relevance is in relation to determining who is and who is not in the class. It is entirely appropriate for members to be told that if they resolved their claim under the IMF Settlement they are not eligible class members unless they purchased shares between 12 January 2010 and 25 February 2010. It is not for the Plaintiff in this case to suggest that there may be issues associated with the enforceability of the IMF Settlement, a settlement that I accept has been fully performed. Nobody else has suggested any issue or difficulty and there is no evidence at all to support any such suggestion. It is simply not an issue and of no relevance save in the sense referred to above.
Further, it does not follow from the fact that the IMF Settlement is to some extent shrouded in secrecy and confidentiality that there are issues surrounding its enforceability, or that the Plaintiffs are somehow entitled to know more so that they can make that determination. In my view this approach is misconceived.
It is, of course, always open to a member of the IMF Settlement to challenge the settlement on recognised grounds. None have done so, and the settlement has indeed been fully performed. In my view any reference to or suggestion that the IMF Settlement may not be enforceable is speculative, without foundation, and more importantly, apt to mislead. It may cause anxiety, panic and uncertainty, in circumstances where there is simply no basis to do so. In short, parties to the IMF Settlement should not be invited or encouraged to have concerns or revisit their fully performed settlement.
Disposition
It follows that the Plaintiff’s Notice to Produce, dated 15 September 2015, directed as it is to matters that I have found to be irrelevant, should be set aside.
The Defendant’s proposed opt-out notice with some expansion and modification as referred to should form the basis of the opt-out notice to be sent to members. The parties should discuss the form of that notice, in light of these reasons and submit a further draft for consideration by the Court.
I propose to deal with costs on the papers and the parties should file written submissions not exceeding 3 pages on or before 16 October 2015.
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