Camping Warehouse v Downer
[2016] VSC 785
•22 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2014 1423
| CAMPING WAREHOUSE AUSTRALIA PTY LTD (ACN 097 355 578) (formerly Mountain Buggy Australia Pty Limited) | Plaintiff |
| v | |
| DOWNER EDI LTD (ACN 003 872 848) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | “On the papers” having considered an application of Lawrence Raymond Smyth filed 24 October 2016 |
DATE OF JUDGMENT: | 22 December 2016 |
CASE MAY BE CITED AS: | Camping Warehouse v Downer |
MEDIUM NEUTRAL CITATION: | [2016] VSC 785 |
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PRACTICE AND PROCEDURE – Application to rescind opt out notice pursuant to s 33J(6) of the Supreme Court Act 1986 – Settlement of a group proceeding alleging breach of continuous disclosure obligations under ss 674, 674(2) and 1041H of the Corporations Act 2001 (Cth) – Settlement approved – Subsequent application to be reinstated as a group member – Bases for reinstatement insufficient – Application refused.
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The Papers filed by Lawrence Raymond Smyth on 24 October 2016:
Summons dated 9 September 2016.
Affidavit of Lawrence Raymond Smyth affirmed 30 August 2016 together with exhibits “LS-1” to “LS-5”.
HIS HONOUR:
The Application
On 8 January 2016 Lawrence Raymond Smyth (the applicant) filed a Notice of Opting Out by Group Member, thereby opting out of this proceeding S CI 2014 1423, between Camping Warehouse Australia Pty Ltd (Camping Warehouse) and Downer EDI Ltd (Downer).
On 24 October 2016 the applicant filed a Summons dated 9 September 2016 together with his supporting affidavit and exhibits thereto affirmed on 30 August 2016. The summons seeks an order of this Court to the effect that he be “reinstated” as a group member of the Camping Warehouse class action.
Between 5 February 2016 and 24 October 2016 this proceeding was settled as between Camping Warehouse and Downer, subject to Court approval.
On 3 May 2016 orders were made in this proceeding, approving the above settlement and its associated Settlement Distribution Scheme.
Background
In March 2014 the plaintiff, Camping Warehouse, commenced proceedings on its own behalf and on behalf of group members against the defendant, Downer to recover damages. Camping Warehouse claimed that such damages had been caused by Downer’s alleged failure to properly inform the Australian Stock Exchange (ASX) pursuant to the continuous disclosure provisions of the Corporations Act 2001 (Cth) which mandate continuous disclosure of materially price sensitive information to the ASX (the Camping Warehouse Proceeding). Those same provisions prohibit misleading and deceptive conduct, including under s 674(2) and s 1041H of the Corporations Act 2001 (Cth); and ASX Listing Rule 3.1 also requires continuous disclosure of certain information.
The trial of the Camping Warehouse Proceeding commenced on 2 February 2016.
On 5 February 2016, the fourth day of trial near the conclusion of opening submissions and shortly after the plaintiff had applied for leave to significantly amend its case, Camping Warehouse and Downer informed the Court that an in-principle settlement agreement had been reached between the parties.
On 26 February 2016, orders were made which included orders approving a Notice of Proposed Settlement to be sent to the group members and displayed on the pre-established website The Notice of Proposed Settlement informed the group members of the terms of the proposed settlement and also informed the group members of their right to object to the proposed settlement if they chose to do so.
On 29 April 2016, both Camping Warehouse and Downer applied pursuant to s 33V and s 33ZF of the Supreme Court Act 1986 (Vic) (the Act) for approval of the proposed settlement of the Camping Warehouse Proceeding (the Approval Application).[1]
[1]Plaintiff’s summons dated 4 March 2016 and hearing 29 April 2016, including T17–18 and T21.6–11.
On 3 May 2016, following consideration of the oral submissions made on 29 April 2016 and supporting material of the parties, orders were made approving the proposed settlement pursuant to ss 33V and 33ZF of the Act. Those orders principally included the following:
Settlement Approval
1.Pursuant to sections 33V and 33ZF of the Supreme Court Act 1986 (Vic) (the Act), the Court approves the settlement of this proceeding upon the terms set out in the Terms of Agreement of Settlement (the Terms of Settlement) executed for and on behalf of the parties on 9 February 2016.
2.Pursuant to section 33ZF of the Act, the Court authorises the plaintiff, nunc pro tunc, for and on behalf of the group members and each of them, to enter into and give effect to the Terms of Settlement as an agreement duly executed by the parties according to its terms, and enter into and give effect to the transactions contemplated by the Terms of Settlement.
3.Pursuant to section 33ZB and section 33ZF of the Act, the persons affected and bound by the settlement of the proceedings be the plaintiff, the defendant and the group members.
Settlement Distribution Scheme
4.Pursuant to sections 33V and 33ZF of the Act, the provisions of the Settlement Distribution Scheme (Settlement Distribution Scheme) be approved as the procedure for distributing among the plaintiff, group members and defendant the Settlement Amount payable by the defendant pursuant to the Terms of Settlement.
Notice of Settlement Approval
5.Pursuant to section 33X of the Act, the form and content of the notice to the Settlement Distribution Scheme be approved as a notice to advise group members of the approval of the settlement of the proceedings (the Notice of Settlement Approval).
6.Pursuant to section 33Y of the Act, the Notice of Settlement Approval be given to the group members through the mechanism specified in clause 6.1 of the Settlement Distribution Scheme.
Settlement Administration
7.Pursuant to section 33ZF of the Act, Elliott Legal Pty Ltd be appointed as Administrator of the Scheme (the Administrator) and act in accordance with the rules in the Settlement Distribution Scheme.
8.Each party, and Elliott Legal Pty Ltd in its capacity as Administrator, have liberty to apply on not less than three clear business days’ notice to each party to the proceeding.
Costs inter partes
9. All costs orders made to date in the proceeding be vacated.
10.There be no order as to costs as between the plaintiff and the defendant.
Other parties
11. Pursuant to section 33V(2) and section 33ZF of the Act, the amount of:
(a)$100,000.00 be approved as the amount of the Plaintiff’s Reimbursement Claim as defined in the Settlement Distribution Scheme; and
(b)$825,000.00 be approved as the amount of the Litigation Funder’s Consideration as defined in the Settlement Distribution Scheme.
Court supervision
12.The Administrator have liberty to apply by correspondence addressed to the Associates to the Honourable Justice Digby.
13.Within 30 days after the completion of the steps referred to in clause 10 of the Settlement Distribution Scheme, the plaintiff apply to list the proceeding for final orders, including orders that the proceeding be dismissed.
The Application to be reinstated as a group member
Mr Smyth’s application to be reinstated as a group member of Camping Warehouse is made pursuant to s 33J(6) of the Act.
Prior to mid-2014 the applicant was a participant in a separate pre-litigation group settlement (the IMF Settlement) which arose as a result of shareholders in Downer foreshadowing claims in relation to the alleged Downer failures generally described in paragraph [5] above.
On 8 January 2016 the applicant formally opted out of the Camping Warehouse Proceeding as part of the class closure process in this proceeding.[2]
[2]Exhibit “LS-2” to the Smyth affidavit of 30 August 2016.
The applicant states in his affidavit of 30 August 2016 that his decision to sign and return his opt out notice in this proceeding was influenced by “ill advice”[3] received in September 2015[4] from the lawyers who were at that time acting for shareholders of Downer in relation to foreshadowed IMF claims against that company.
[3]Smyth affidavit of 30 August 2016, [7].
[4]Exhibit “LS-1” to the Smyth affidavit of 30 August 2016.
The applicant alleges that the IMF claims, which were in respect of Downer shares acquired between 25 February 2010 and 31 May 2010:
“fell short” regarding the earlier relevant dates for Downer shares acquired in the period from 12 January 2010 to 24 February 2010 and that the lawyers in relation to the IMF claims were remiss not to include these dates as part of the IMF claims.[5]
By these assertions I have taken the applicant to mean that in his view the lawyers in relation to the IMF claims failed to frame those claims in a way which covered an appropriately extensive period of time so as to ensure that all shareholders affected by alleged Downer breaches were able to bring their claims within the IMF claims.
[5]Smyth affidavit of 30 August 2016, [2].
The applicant further asserts that as a result of the advice he received from the IMF lawyers in September 2015, he formed the impression that the IMF lawyers were discouraging his participation in this group proceeding conducted by Elliott Legal, Camping Warehouse’s Lawyers.
The applicant also states in his affidavit that when he received an Opt Out Notice in relation to the Camping Warehouse Proceeding, he signed and returned it “for fear of being liable as part of the Elliott action and with the ill-advised advice from Slater and Gordon that any further claim may be invalid.”[6]
[6]Ibid [3].
The applicant’s affidavit also states that sometime after February 2016, he received the Notice to Group Members[7] from the Supreme Court of Victoria regarding the settlement of the Downer EDI Shareholder Class Action in this proceeding, subject to approval by the Court.[8]
[7]Ibid [4].
[8]Ibid [4]. The Notice of Group Settlement was approved and sent out to group members as part of orders made on 26 February 2016.
Soon after receiving the aforementioned Notice to Group Members and believing he had a valid claim against Downer for shares acquired before the period covered by the IMF claims settlement, the applicant contacted Elliott Legal.[9] In this regard, the applicant’s affidavit states as follows:
Sometime after February 2016, I received the notice from Supreme Court of Victoria – refer to Exhibit LS3. At this time I contacted Elliott Legal believing I had a valid claim against Downer for shares outside the Slater and Gordon claim. Elliott Legal advised that according to their records I was still part of the eligible participants on their list. I forwarded requested documents to Elliott legal with the attached letter – refer to Exhibit LS4.[10]
[9]Ibid [4].
[10]Ibid [4].
The applicant also states in his affidavit that under cover of a letter dated 20 June 2016[11] he forwarded to Elliott Legal, at their request, documents describing how the lawyer in relation to the IMF claims had ‘wrongly influenced’ his decision to sign and return the opt out form, and outlining his views on relevant legal precedent in relation to being reinstated as a group member in the Camping Warehouse claim.
[11]Exhibit “LS-4” to the Smyth affidavit of 30 August 2016.
On 27 July 2016, the applicant received an email from Elliott Legal[12] stating, inter alia, that in order to recant his op out position, the applicant would need to make application to the Court for orders to that effect.
[12]Exhibit “LS-5” to the Smyth affidavit of 30 August 2016.
Elliott Legal also noted in their email dated 27 July 2016 that Downer had commented to Elliott Legal that they would neither oppose nor consent to such an application, save as to any adverse costs order, and that Downer did not desire to be heard on such an application. Elliott Legal further advised by the same email that Downer’s solicitors do not believe the applicant’s situation “is an issue for expert determination under the settlement scheme (in these proceedings), as the expert in their view, does not have power to allow [the applicant] to “opt back in” to the claim or override the effect of [the applicant’s] Opt Out Notice, especially in circumstances where [the applicant’s] claim against Downer would now be statute barred”.[13]
[13]Ibid.
Further, Downer’s solicitors have stated that if the applicant were to be admitted by the Court as a group member in relation to the current proceeding, his claim would be in respect of 5,000 shares.[14] Furthermore, Downer’s solicitors have noted that Downer holds a release from the applicant for his claim made as part of the IMF funded claim.[15]
[14]Ibid.
[15]Ibid.
Elliott Legal have, however, not communicated a position on this application, nor has that firm indicated expressly what their client Camping Warehouse’s attitude is to this application. I infer, however, from Elliott Legal’s email of 27 July 2016 [10.32am][16] that their client does not desire to make any positive response to the application notified by Mr Smyth’s Summons dated 9 September 2016, and further that their client Camping Warehouse is also content that this application be dealt with on the papers.
[16]Ibid.
Power of the Court to ‘reinstate’ a person who has opted-out
Section 33J of the Act provides as follows:
Right of group member to opt out
(1)The Court must fix a date before which a group member may opt out of a group proceeding.
(2)A group member may opt out of the group proceeding by notice in writing before the date so fixed.
(3)The Court, on the application of a group member, the plaintiff or the defendant, may extend the period within which a group member may opt out of the group proceeding.
(4)Except with the leave of the Court, the trial of a group proceeding must not commence earlier than the date before which a group member may opt out of the proceeding.
(5)Unless the Court otherwise orders, a person who has opted out of a group proceeding must be taken never to have been a group member.
(6)The Court, on the application of a person who has opted out of a group proceeding, may reinstate that person as a group member on such terms as the Court thinks fit.
The Court’s task under s 33J(6) of the Act
Ordinarily, once a person has opted out of a group proceeding and has given notice under s 33J(2) of the Act, that is the end of the matter. However the Court, on the application of a person who has opted out of a group proceeding, is empowered pursuant to s 33J(6) of the Act to exercise its discretion to reinstate that person as a group member, on such terms as the Court thinks fit.
The discretionary powers of the Court under s 33J(6) of the Act are broad and allow considerable latitude as to the determination of whether the person should be reinstated, and as to the terms of any such reinstatement.
While any group member may opt out of a proceeding to avoid his or her rights being affected in any way by the outcome of group proceedings in order to ensure the orderly and efficient resolution of proceedings, it is most desirable that such action is timely and unequivocal on the part of the group member desiring to opt out.
The closing of the class of participating group members and the identification of the group members of the closed class is usually an important aspect in the management of representative proceedings. More often than not in group proceedings these steps are also important in processes directed to finalising either the determination or the settlement of such proceedings.
Accordingly, the need for clarity in relation to the number of participating group members, and finality in that regard, is most desirable and most important in relation to the parties’ and the Court’s consideration of settlement options and the Court’s approval of any such settlement. In relation to each of these activities, the number of persons entitled to share in any agreed settlement sum is likely to be a critical consideration.
In the result, and for reasons including those referred to above, the decision of a relevant group member to opt out must be treated seriously and the Court should be satisfied that there is an appropriate basis established for the positive exercise of its discretion under s 33J(6) of the Act.[17]
[17]Dorajay Pty Ltd v Aristocrat Leisure Ltd [2008] FCA 1311; (2008) 67 ACSR 569 at 574 [13].
In Paxtours International Travel Pty Ltd v Singapore Airlines Ltd, Robertson J stated:[18]
[18][2012] FCA 426, [42]–[43].
In my opinion the factors relevant to the exercise of that discretion to reinstate include:
(i) the reasons for opting out;
(ii)the period of time between the opt-out notice and the application to reinstate and what steps, if any, have been taken in the proceedings between the time of the opt-out notice and the application to reinstate;
(iii) the grounds for seeking reinstatement;
(iv)any prejudice to the applicant, the existing group members and the respondent or respondents; and
(v)the effect on the applicant for reinstatement of permitting or refusing reinstatement, including any proposed terms.
These matters should be considered in the context of the terms and purpose of Part IVA.
If a party which had opted out for commercial reasons was permitted to be reinstated where those reasons had changed and it was now not commercially disadvantageous but, in light of the settlement, commercially advantageous to participate, that entity would have in effect a choice which, in my opinion, is inimical to the scheme of Part IVA. The party seeking to be reinstated chose not to be, and would not have been, at risk of the representative proceedings failing in whole or in part, whether by judgment or compromise, but now seeks the favourable exercise of the Court’s discretion to allow it to take the benefit of what that party regards as a favourable settlement.
In Darcy v Medtel Pty Ltd, Sackville J stated:[19]
I should also make it clear that the reason for giving any group member who has opted out an opportunity to withdraw his or her opt out notice is to overcome any injustice arising from the possibility that the group member acted on incomplete information in making his or her decision. Had an application been made simply on the ground that group members who have opted out should be permitted to change their mind, the result may well have been different: King v AG Australia Holdings Limited (formerly GIO Australia Holdings Limited) [2002] FCA 364 at [6], per Moore J.
[19][2002] FCA 925, [10].
While discussed in the context of admitting a person who had applied to be included in a settlement after the deadline stipulated in the settlement scheme (referred to as ‘latecomers’ in the decision), the approach taken by Stone J in Dorajay Pty Ltd v Aristocrat Leisure Ltd[20] provides some further guidance as to the approach to the reinstatement of a person who has opted out in relation to group proceedings. Her Honour was of the view that a person should not be reinstated unless the Court is affirmatively satisfied that it would be unjust to refuse the application to be reinstated.[21]
[20][2008] FCA 1311; (2008) 67 ACSR 569.
[21]Ibid [14].
Each application is to be considered on its own facts and individual merit, and such applications should ordinarily provide details of the circumstances and reasons as to why the applicant should be reinstated.[22]
[22]Ibid.
Considerations
In this application I consider that the following factors are particularly relevant to the exercise of the court’s discretion under s 33J(6) of the Act and I also consider that in the overall such factors decisively militate against an order being made in this instance to reinstate the applicant as a group member in this proceeding. Notwithstanding the countervailing factors referred to in paragraph [37] below, I am unpersuaded that the applicant’s reasons for opting out are satisfactory or sufficient:
(a) In particular, I am unpersuaded that the applicant’s opt-out notice was filed in error or by mistake or on the basis of incomplete information.[23]
[23]King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2002] FCA 364, [6]; Darcy v Medtel Pty Ltd [2002] FCA 925.
(b) Similarly, I am unpersuaded that the communication received by the applicant from the lawyers associated with the IMF claims dated 7 September 2015,[24] either discouraged participation in these proceedings or in any way “ill advised” the applicant in any relevant sense.
[24]Exhibit “LS-5” to the Smyth Affidavit affirmed 30 August 2016.
(c) In essence the subject letter from the lawyers associated with the IMF claim addressed the terms and effect of the proposed Class Closure Notice which the plaintiff’s solicitors desired to send to group members in this proceeding, and referred to potential costs which may be generated by procedural applications concerning possible applications by Camping Warehouse’s lawyers, including in relation to the IMF settlement, or by lawyers in relation to the IMF claims in connection with such issues, but did not deal with the merits or efficacy of this proceeding per se.
(d) Furthermore, the subject letter does not advise or encourage group members to opt out of these proceedings and ultimately leaves the decision up to each recipient whether to opt out or not.
(e) I also consider that there has been unreasonable delay by the applicant in seeking to withdraw the opt-out notice. That delay continued between February 2016 and October 2016.[25]
(f) Furthermore, significant steps had been taken in the proceeding in the time between the date of the applicant’s opt-out notice and the application for reinstatement provided to the Court in late October 2016, namely, the Camping Warehouse approval application in early March 2016 and the orders of the Court on 3 May 2016 approving the settlement of these group proceedings.[26]
[25]Notice to Group Members advising settlement of these proceedings in February 2016 to the date of the applicant’s Summons filed 24 October 2016.
[26]King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd) [2002] FCA 364, [6].
I have also weighed in the balance the following:
(a) In the applicant’s favour there is unlikely to be any material prejudice to the parties if the applicant is reinstated.[27]
[27]Ibid.
(b) The applicant’s shareholding of 5,000 shares would be unlikely to result in a material diminution of the group members’ recovery from the settlement sum because the applicant’s entitlement, were his application to be successful, would represent a relatively small sum.
(c) In the applicant’s favour it is likely that the applicant will suffer some financial detriment because he has not been reinstated as a group member. This is so given that he will not share in the settlement sum distribution to group members.
(d) Finally, Camping Warehouse and Downer do not oppose this application.
Conclusions
In the circumstances I am not satisfied that the applicant opted out because he was the victim of misconduct, or improper behaviour or any relevant influence affecting him in relation to his decision to opt out of these proceedings, nor am I satisfied that he was misinformed about the opt out process or the consequences of that decision.
Accordingly, taking all the above matters into account, including the applicant’s delay referred to in paragraphs 36(e) and (f) above, I consider that it is just to refuse the subject application in this instance.
Decision
For the above reasons I refuse the subject application.
Orders
I make the following orders:
1.The Summons of Lawrence Raymond Smyth filed 24 October 2016 is dismissed with no order as to costs.
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