Carnie & Anor v Esanda Finance Corporation Limited

[1994] HCATrans 220

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S124 of 1993

B e t w e e n -

AINSLEY GEORGE CARNIE and

DIANNE HELEN CARNIE

Appellants

and

ESANDA FINANCE CORPORATION

LIMITED

Respondent

MASON CJ
BRENNAN J
DEANE J
DAWSON J
TOOHEY J
GAUDRON J

McHUGH J

Carnie(2) 1 3/3/94

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 3 MARCH 1994, AT 10.16 AM

Copyright in ·the High Court of Australia

MR J. BASTEN, QC: If the Court pleases, I appear with

MR N.F. FRANCEY, for the appellants. (instructed

by G.J. Kirk, Consumer Credit & Legal Centre)

MR P.G. HELY, QC: If the Court pleases, I appear with

MR R.C. McDOUGALL, QC, and MR P.R. WHITFORD, for

the respondent. (instructed by Corrs Chambers

Westgarth)

MASON CJ: Yes, Mr Basten.

MR BASTEN:  Thank you, You~ Honour. May I hand up a copy of

our outline of argument.

MASON CJ:	I already have a copy of that unless you are replacing it with an amended and improved version.
MR BASTEN:	It is not amended; unfortunately it is not

improved, Your Honour. If Your Honours all have

copies - - -

MASON CJ:	I think we all have.
MR BASTEN:	I think a copy was sent up by facsimile, so if

it is legible it is the same. The matter before

the Court involves the application of the
representative procedure rule in New South Wales to
a matter which arises under the Credit Act in that
State, and the issue is, I think, one in relatively
narrow compass in terms of legal principle. As

Chief Justice Gleeson said in the Court of Appeal,

really the question turns upon the interpretation

of the phrase, "the same interest in the

proceeding" in rule 13 in Part 8, and it is to that
phrase which I will take the Court if I may in due

course.

Before I do that, may I turn briefly to the

background factual material which this case

involves and having done that may I briefly	indicate so much of the structure of the Credit Act
as is relevant to the determination of the matter. In terms of the facts, they can readily be
gleamed from the judgment of the Chief Justice which commences at page 315 of the appeal books.
The account, he says at line 23, is taken from the
judgment of Mr Justice Cohen in the equity
division. The matter came before Mr Justice Cohen
on appeal from Master Hogan. Justice Cohen's
judgment appears at page 269. In substance, the
appeal in the Court of Appeal was a challenge to
the principles accepted by Justice Cohen. He did
not uphold the appeal but he required that the
statement of claim be amended. It was amended. It
went back before Master McLaughlin on a second

Carnie(2) 2 3/3/94

strike out motion by the respondents and

Master McLaughlin held that the matter had properly

been amended in accordance with the principles

accepted by Mr Justice Cohen, and from tnere the

matter went un appeal by reference from

Mr Justice Young to the Court of Appeal. The main

judgment as it were at first instance is that of

Mr Justice Cohen.

The facts of the matter involve a loan provided by the respondent to the appellants as

appears at the top of page 316 in the amount of

some $22,000 for the purchase of some agricultural

machinery, namely a header.

At line 10 His Honour notes that it was common

ground that the contract was a loan contract under

section 5 of the Credit Act, and that it complied

with the requirements of section 36 of that Act.	I
will take the Court to those provisions in a
moment, if I may. His Honour then notes that due
to circumstances in the agricultural area the
appellants were unable to pay their instalment in
February of 1987.

They sought a variation of their agreement

with the respondent and that agreement was entered

into, and it is that agreement which, it is said,

does not comply with the disclosure provisions of

the Credit Act. As His Honour notes at line 26 the
provisions which are in issue concern the increase
of the outstanding balance of the amount financed

at the time of variation, and certain statutory

consequences which flow from the documentation of

an agreement which does increase that amount. He

says at line 5 on page 317 that:

The variation agreement was entered into

in early 1987.

He gives some figures which are not relevant

for present purposes, and notes at the second main The respondents contend that the

paragraph on that page at line 19:

financial arrangements contained in the

variation agreement were outside what was

permitted by s70 of the Act. In particular,

they complain that, under the agreement,

unpaid credit charges were added to the

original amount borrowed. In the result, an

amount of outstanding interest was

capitalized, and would in turn itself bear

interest. This, it is said, was not

impossible under the legislation, but it

required a contractual procedure that was not

followed by the appellant.

Carnie(2) 3 3/3/94

Then at the top of the next page, of some

significance for the present procedure, His Honour

notes:

Information available to the respondents

shows that, at the time the variation

agreement was entered into, the transaction

was of a kind that was regularly entered into

by the appellant in the ordinary course of its

business. Thus, the respondents say, there

must be many other persons who entered into

offending variation agreements of the same

kind.

The material which His Honour is summarizing there

appears in the judgment of Mr Justice Cohen at

page 271 and in slightly more detail, if I may take

the Court to that, going to the bottom of that

page, His Honour Mr Justice Cohen noted that there

had been:

discovery and affidavit evidence - What had happened in this case was that the notice

of motion to strike out the representative part of
the statement of claim was put on before any
pleadings or interlocutory step had been taken.
During the course of the matter before

Mr Justice Cohen, a subpoena was issued to the respondent seeking certain documents. It is that

material to which His Honour refers at the bottom
of page 271. His Honour notes that there were six

other contracts; those were actually contracts of

which the appellants were aware prior to issuing

the subpoena:

These all show that the amount set out as the

amount financed at the time of the variation

consisted of the original loan sum plus the

credit charges less any payments which had

already been made. It appears that the

defendant had treated all of these variations

in a similar way, namely by setting out what

was then due under the original contract,
including credit charges, calculating what

seemed to the defendant to be the appropriate

additional credit charges and setting out the

extended times and amounts for payment.

TOOHEY J:  Mr Basten, were the regulated contracts confined

to a particular type of chattel such as farm

machinery or machinery of some sort, or does it

range much more widely than that?

MR BASTEN:  It ranges more widely than that, Your Honour.

The contracts in question, which were known to the

court, were all for agricultural machinery and were

Carnie(2) 4 3/3/94

seasonal contracts. If I may just go on to the

bottom of 272. At line 15 His Honour notes that

there were documents produced in evidence which

were guidelines or directions by the respondent to

its employees, as to how to carry out the various

forms of calculations.

These included directions as to variation agreements under s 70. Attached to a set of

those guidelines was a work sheet which sets out the manner in which the calculations are

to be made when dealing with those variations.

These suggest that the manner of calculating

the figures inserted in the variation of

agreement relating to the plaintiffs was in

accordance with the usual practice of the

defendant -

and so on. So in answer to Your Honour's question,

we relied to established the common element upon a

common practice of the defendant in relation to

variation agreements generally.

If I may just illustrate that in two ways:

firstly, at page 90 there appears a worksheet which

relates to the particular appellants in this case,

and shows how calculations were undertaken. I need

not go through the details for Your Honours. There

is, on the next page, a standard form of worksheet

in blank which shows how the calculations were

undertaken in relation to each of the variation

agreements, at least on a prima facie basis. And

there were some instructions, which are also

contained in the papers at page 107, dealing with

variations, and in particular subsequently at

page 110 over to page 111. There are quite

detailed instructions given to the employees of the

respondent as to how to calculate a variation in

accordance with section 70.

The significance of this, if I may come to it

in a moment, is that if that instruction achieved a

result which was not in accordance with section 70

then certain other consequences flowed for the

required disclosures in the loan contract. Perhaps

it would be convenient if I might go to the Act

just to explain what the legislative structure was

within which the respondent was operating.

The Credit Act 1984 of New South Wales starts

with a number of definitions of which only one is

relevant for present purposes. That is the
definition of ''loan contract" in section 5. "Loan

contract" is widely defined in terms most of which

are not of significance but paragraph (a), as one

can see, catches all conduct which involves:

Carnie	3/3/94 paying an amount to or in accordance with the
instructions of that other person -

Paragraph (c) expressly refers to -

varying the terms of a contract under which

moneys owed to him by that other person are

payable -

So that the definition of "loan contract" covers a

wide range of financial accommodation. The

provision referring to section 15, to which that

definition is subject, simply excludes credit sale

contracts and continuing credit contracts which are

otherwise dealt with in the Act. So "loan contract" is given a broad definition, two

subcategories are excluded but it expressly

includes the possibility of a variation, itself

constituting a loan contract.

The Act having defined broadly the terms of

loan contracts which are regulated by the Act.

the contract then provides a more limited class of the loan contract must be under $20,000 and have an annual percentage rate, which I think in

Your Honours' copies may be shown as 14 per cent.

MASON CJ: Yes.

MR BASTEN: That has been reduced, I think, something in the

order of 8 per cent. I can check the figure.

Mr McDougall tells me it is 8 per cent from

6 July 1993.

This contract involved an amount of $22,000,

which is in excess of the figure given in

section 30(2)(a), but it was a contract with a

mortgage relating to an article of farm machinery

and therefore falls within the definition because

of the words appearing at the end of that

subsection. So, the original contract was a regulated

contract for the purposes of the Act. That meant,

relevantly for present purposes, that it needed to

contain the information referred to in section 36
of the Act, sometimes referred to as the "truth in

lending provision". The purpose is, of course, to

create uniform disclosures in credit contracts so
that comparisons can be made in the market-place

between different financial products so that

consumers can properly understand what they are

paying for credit.

If the provisions of section 36 are not complied with there is an automatic civil penalty

Carnie(2) 6 3/3/94

imposed pursuant to section 42 which denies to the credit provider any entitlement to credit charges,

namely the interest component of repayments.

Section 42(1) states that it is, "Subject to

section 85". There is provision in section 85 for

amelioration of that civil penalty by the

commercial tribunal upon an application by the

credit provider seeking reinstatement.

The terms of section 85 are of no immediate

importance. Section 86, I note in passing,

provides a form of class action available to the

credit provider who may bring proceedings in

relation to numerous contracts or indeed one or

more contracts and may identify them simply by

specifying the class by way of the period entered

into or by the contravention or failure involved,

as appears from 86(l)(a), (b) and (c). There is no

provision in the Act for a debtor under a regulated contract to bring any proceedings in the commercial

tribunal to test the compliance of the credit

provider.

Just before going to section 70 may I jump

ahead to section 157 which contains a prohibition

on contracting out in the usual form. Section 70

of the Act then makes provision for variation of
regulated loan contracts, and the critical

provision in section 70 is actually subsection (5).

Subsection (5) provides that where an agreement to

vary is in accordance with section 70, then it is
not a loan contract. In other words, it falls
outside the requirements of section 36 for
disclosure of the relevant information, and the
policy is not hard to discover because section 70

requires that the variation to be within its terms

must not increase, except in particular ways which

are not relevant, the outstanding balance of the

amount financed nor the annual percentage rate, and

so on.	So that section 70 is perceived to be a
provision which does not require the redisclosure

of all the items which have already been disclosed

at the outset because the variation does not affect

that information.

However, if the contract does not comply with

section 70, and that is the nub of the appellants'

case on the substance of this matter, then the

respondent does not enjoy the protection of

subsection (5) and must disclose all the relevant
material required by section 36 or be subject to

the civil penalty which follows from section 42.

BRENNAN J:  What is the non-compliance if we look at

page 90?

Carnie(2) 3/3/94

MR BASTEN:	The particular variation agreement whir,h is the subject of the proceedings appears at page 25.	The
contract which is varied appears in a numDer of

places - there is a copy at page 225, Mr Hely tells

me. Some of these documents are not terribly

legible.

The comparison, Your Honour, helps to identify

the material which is not being disclosed. For
example, there is no disclosure of the annual

percentage rate, which is a critical factor for

comparison purposes, which appears in the contract

on page 225 in the second column, at item 14,

line 23, there shown as 27.92 per cent.

Your Ho~our will see that the requirements of

financial detail is not terribly clear, at the top

of that column -

DEANE J:	What page was not the
MR BASTEN:	The variation agreement is at 25, Your Honour.
DEANE J:	I see.
MR BASTEN:	The schedule to the variation agreement which

appears in the middle of 25, in fact complies with

the material which must be stated pursuant to

section 70. So that it is clear that there are two

forms the respondent is using, one is a loan

contract form, and the other is a variation

agreement, and they are in forms which recognize

the requirements of the Act.

BRENNAN J: What is the alleged breach?

MR BASTEN:  The alleged breach is that the - if Your Honour

looks at 25 line 21, the outstanding balance of the
amount financed at the time of variation is shown

as $31,000. That is in excess of the $22,000,

which was the original amount financed, therefore

there has been an increase in it. That takes it

outside section 70.

TOOHEY J: And the category or class with which this section

is concerned is narrowed to those loan agreements

which were the subject of a variation said not to

comply with the Act?

MR BASTEN: Yes, that is so.

BRENNAN J: In that respect.

MR BASTEN: In that respect. That respect is defined in the

further amended statement of claim at clause 6,

which refers specifically to the method of

calculation of page 11, (b)(i) and (ii) allow for

Carnie(2) 3/3/94

two possible bases upon which the calculation might

be explained, both of which, it is said, fall

outside section 70.

Your Honours, I will need to return to the policy and structure of the Act at a later stage.

I think that is probably all I need to say about it

at this stage. If it is convenient I would turn to

the judgment in the Court of Appeal and, in

particular, the judgment of the Chief Justice at

page 315 and following. I note that His Honour's

judgment was concurred in by Mr Justice Meagher in

a brief judgment at page 355 but, as I understand

it, the reasoning upon which the respondent relies

is fully set out in the judgment of the

Chief Justice.	I will deal with that, if I may,
primarily.

The Chief Justice deals with the matter on a number of bases with which we would seek to take

issue. Perhaps the first which I might deal with

by way of reference to the authorities is the

approach that His Honour adopts to the test in

Part 8 rule 13 concerning same interest, and his

application of the principles which were recognized

by the House of Lords in Duke of Bedford v Ellis.

His Honour deals with Duke of Bedford v Ellis

in a lengthy discussion starting at page 321 and

continuing through to the bottom of page 322, where

His Honour then turns to some other more recent

authority, but he returns to the approach adopted

in Duke of Bedford v Ellis at page 327 in a passage

which perhaps summarizes the approach His Honour

took. After a quote from the judgment of

Mr Justice Estey in Naken, a decision of the

Canadian Supreme Court to which I will have to return, His Honour says at page 327 line 32:

It is the meaning of the expression "the

same interest", or similar expressions such as

"common interest" which appear in other

versions of the same rule, that lies at the

heart of the problem. Where there is a

derivative action, or where parties are in

dispute about a common fund, or common

property, or where (as in Duke of Bedford v

Ellis) there is an assertion of a common claim

(as distinct from a similar or even identical

type of claim) by or against a readily

identifiable class of person, the interest is

clear enough.

Now, it is not suggested of course in these

proceedings that we seek to fall within the

derivative action "common fund, or common property"

categories. What we say is that His Honour in

Carnie(2) 9 3/3/94

identifying Duke of Bedford v Ellis as requiring a

readily identifiable class of persons and then

saying that we fall outside that readily

identifiable class, has taken a view of

Duke of Bedford v Ellis and a view of the facts in

this case, which are not compatible with

authority - - -

DAWSON J:  I ask at this stage, Mr Basten, what is the

interest of the plaintiffs in this case in

representing an unidentified other group of

potential plaintiffs?

MR BASTEN:  When Your Honour says "the interest", is

Your Honour using that term in the sense of the

same interest as in the phrase used in the rule or

in a - - -?

DAWSON J:  I am not using it in any particular sense. are they doing it? Why

MR BASTEN:	Why are they doing it? Your Honour, there are a number of reasons which I can deal with at this
stage.  I was going to come back to the - - -

DAWSON J: If I can make myself clear: in an ordinary

representative action you have to join all the

parties and that is a nuisance and so it is very

convenient to select some who can represent those

who would otherwise have to be there, but that is

not this case.

MR BASTEN:  No, it is not this case, Your Honour; in one

sense it is not anyway. Might I deal with it in

this way, Your Honour, that there is an approach

available to the plaintiffs, or the appellants, if

they have the same interest as specified in

rule 13. The benefits to them of adopting that

approach involves a second question and I think

that was the question Your Honour is really putting

to me. The benefits may be one of a number. If

they are correct in their argument that there is a

breach of section 70, then it may be that the

company will then simply waive the payments that

may be made by them in relation to credit charges

or the company may go to the commercial tribunal

and make an application under section 85. If it

takes the latter approach, which one would expect,

especially if it treats the finding of the court as authoritative then, in those section 85 proceedings it may be in the interests of the appellants to

show that this was not simply a one-off breach or a

breach in an individual case but was a breach which

had ramifications across a wide area of the

appellants' business, so that failure to identify

the breach may itself constitute a more

reprehensible course of conduct than otherwise.

Carnie(2) 10 3/3/94

That may effect the reinstatement which the appellant would obtain, so that they may have

a - - -

DAWSON J:  ..... show that without having to join other

people in the particular action.

MR BASTEN:  There is authority in the Commercial Tribunal in

Victoria that the tribunal will not engage in that sort of broad inquiry into the practices of a credit provider where there is a single section 85

application in relation to one contract. It may be

that the tribunal in a particular case might be

persuaded otherwise, but they would certainly face

that line of authority.

The second problem that they have is that there is already a case referred to on our

subsidiary list of Rose v Esanda in which a

tribunal has upheld the argument that the variation

agreement was in breach of section 70, but the

company has not acted on that case in relation to

New South Wales contracts or, as I understand it,

Victorian contracts; it is a Victorian case. It is

in the public interest that if there is a breach

then proceedings be taken which encompass the range

of breaches.

That may have consequences for the

availability, for example, of legal aid to be

plaintiffs who might not otherwise be able to bring

the proceedings unless there were a public

interest. That is a pragmatic factor that

Your Honour may or may not think relevant to their

action, but if in fact legal aid is, as is commonly
the case in New South Wales, not available in

commercial disputes except where there is a public

interest involved, then it is in their interests to

frame the action in a way which would maintain a

public interest.

The third answer relates to the nature of the

legislation, and in a sense is an answer perhaps to

the other side of the question which Your Honour

was putting to me, namely that in formulating an
action this way they are, in Mr Justice Meagher's words, "inter-meddling in the commercial business of other persons who have contracts with the

respondent". That is, in our submission, not the

correct interpretation of how this legislation

works, because the policy of the civil penalty provision and the disclosure provisions are to

create, as I think I said, an informed market for

the provision of services where the costs and terms
of the financial product of each credit provider
are readily comparable. At the customer level the

policy is to avoid unfairness to individuals, no

Carnie(2) 11 3/3/94

doubt, so that they can be said to be aware of
those terms and conditions. But the contravention

of a term, like section 70 and section 36, will not

only disadvantage the customer but may give the

credit provider an unfair advantage in the

market-place over other credit providers.

So that the sanction of the civil penalty,

which is available to promote compliance with the

legislation and which applies automatically,

involves the principle of forfeiture by the credit

provider rather than any benefit to the individual.

Of course, it is not open to the individual to

contract out of that conclusion and it may be said

that even where there is voluntary repayment where
there is no liability on the part of others to make

repayment that that is something which the

plaintiff should tolerate but, in fact, that would

tend to undermine the very policy of the civil

penalty provision. So that, in our submission, it

is entirely appropriate to seek to obtain a binding

order in relation to the respondent covering the

whole range of contracts which fall within its

practice and policy, and that - - -

TOOHEY J:  Mr Basten, the answers you have given to

Justice Dawson appear to relate to the operation of rule 13, assuming that it applies. In other words,

whether the Court would make an order rejecting the

representative action for the reasons that are sort

of envisaged by rule 13(1). But, do we get to that

point? Are these relevant to the notion of "the

same interest"?

MR BASTEN:  I think not, Your Honour. Except to this

extent - might I, in answering that, go to the case

of Bedford v Ellis because that is really the

starting point for an analysis of "the same

interest" as it appears in the rule. I accept what

Your Honour says; I may have misunderstood

Justice Dawson's question but I was answering

His Honour in terms of something other than the

definition of "the same interest" in the rule.

TOOHEY J: Yes, I was not suggesting you were. I was just

seeking clarification for myself.

MR BASTEN:	Yes.
DAWSON J:	Do I understand it that the interest which the

plaintiffs have in representing a number of other
claimants is to further their own claim, either in
the court or in the tribunal, or to make a point in

the public interest?

Carnie(2) 12 3/3/94

MR BASTEN:  Your Honour, the answer to that is, in part,

both, but that neither of those interests are part

of the definition of "the same interest" as it is

used in Part 8 rule 13. In other words, I am not

suggesting that they have any interest in - - -

DAWSON J: Well, lets avoid the term, "interest". The

motivation of the plaintiffs is to aid their own

claim in one way or another or to make a point in

the public interest.

MR BASTEN: Both, yes, Your Honour.

GAUDRON J: And to enforce the law.

MR BASTEN:  Yes, I took that to be rolled into the last

category.

Motivation is one thing. Motivation is a

matter which is raised in the course of the
judgment in the Court of Appeal, and I was going to
come back to that. There are a number of occasions
on which the Chief Justice refers to the

possibility that other borrowers may be quite

content with their arrangement with the respondent.

I have perhaps already indicated why their

contentment is neither relevant nor necessarily

supportive of the policy of the Act and, therefore,

is not really a relevant consideration in this

litigation.

DAWSON J: But one has to really understand what it is all

about and you are briefed by a public interest

group and it may well be that the plaintiffs are

merely selected as a means of furthering the

interests of the public interest group.

MR BASTEN:  No, that is not so, Your Honour. My instructing

solicitor has no interest in the litigation in that

sense.	The public interest which he may be
interested in supporting is represented by the

plaintiffs, that is true, and indeed by some other

parties of whom he is aware.

DAWSON J:  I am not saying that in any pejorative sense but

just to know where we are.

MR BASTEN: Yes, subject to that qualification, I accept

what Your Honour says but it is not a group which

is set up with any interest of its own in these

proceedings.

But if one turns to the question of what the

phrase "the same interest in the proceedings" means

in the rule, then it is instructive, I think, to

start with the speeches in the House of Lords in

Ellis v Duke of Bedford and, in some respects, to

Carnie(2) 13 3/3/94

understand them it may be of assistance to start in

the Court of Appeal. The judgment below is

reported in (1899) 1 Ch 494, and there, and I think

only there, are set out some of the provisions of
the Covent Garden Market Act of 1828 which are the
subject of the dispute. The relevant section 7 is
set out at page 495 and in the middle of the page

it provides for certain stands to be identified

and:

exclusively appropriated to the reception of

waggons and carts in which fruit, flowers,

vegetables, roots, or herbs ..... shall be

brought to the market for sale -

and then, at about point 6 on the page, the last

three lines identify the growers of such produce -

as persons having the preferable right to

resort to such stands under the provisions of

this Act.

So that the class of persons who are identified

under that Act was a class no better identified

than as the growers. The decision came before Mr Justice Romer in the first instance and the relevant passage in his judgment appears from the

bottom of page 504 to the top of page 505 in which

His Honour rejected the proposition that the

growers had any relevant right or interest which

could be pursued under this section.

That decision was considered by the Court of

Appeal and the Master of the Rolls commences at

page 511, coming to a conclusion which differs from

Mr Justice Romer and His Lordship deals with the

matter in two ways. At page 512, at the top of the

page, he puts the test in a negative sense:

I cannot see why some of the growers should

whether they have or not this preferential

not be at liberty to bring the question

right to a test in an action, framed as this

is, by some of them on behalf of themselves

and the other growers •.... ! have looked
through the Act very carefully, and I have

studied it section by section, and if I could

come to the conclusion that the action was

frivolous ..... it would follow that the action

was altogether misconceived -

and should be stopped. His Honour does not take

that view.

The second limb of the test which His Lordship

applies appears at page 514 in the first full

paragraph. He asks rhetorically:

Carnie(2} 14 3/3/94

Would it not be right to have the question

whether the preferential rights asserted exist
or not tried in an action brought hy some of

the growers on behalf of themselve3 and the

others? I cannot conceive any reason why it

should not. The growers, who are a statutory

indefinite class (whether large or small I do

not know), are a class on which the statute

has conferred certain preferential rights.

There is, according to the allegations in the

statement of claim, a common right, a common

interest, for it is alleged that the Duke

ignores the rights of the whole class -

and so on. I think I need not take Your Honours to

any more except to note that there is a dissenting

judgment by Lord Justice Vaughan Williams who later

becomes in the majority in Markt & Co Ltd v Knight

Steamship to which I will need to go briefly.

In the House of Lords the matter is reported

in (1901) AC 1.	The leading speech is that of
Lord Macnaghten which starts on page 6.	The

allegations are set out on page 7, and at the

bottom of page 7 comes a passage which bears

consideration. His Lordship identifies the test

three lines from the bottom:

In considering whether a representative action

is maintainable, you have to consider what is

common to the class, not what differentiates

the cases of individual members.

Going over the page His Honour then refers to one needed some beneficial proprietary right and

that, of course, is reflected in two of the first

three categories noted by Chief Justice Gleeson.

His Lordship then, at about point 5 on page 8 says:

The old rule in the Court of Chancery was very

simple and perfectly well understood.

I will come back to that if I may. He refers

to "the presence of all parties interested" being

required; the difficulty of coming at justice

where they were too numerous, and he goes on:

It was originally a rule of convenience: for

the sake of convenience it was relaxed. Given

a common interest and a common grievance, a

representative suit was in order if the relief

sought was in its nature beneficial to all

whom the plaintiff proposed to represent. To

limit the rule to persons having a beneficial

proprietary interest would be opposed to

Carnie(2) 15 3/3/94

precedent, and not, I think, in accordance

with common sense.

I will come, if I may, to that tripartite test

again but, in our submission, it is important that

His Lordship is using the tripartite test as a

basis for rejecting the beneficial proprietary

interest as a limitation on the availability of a

representative action.

His Lordship then deals with a number of cases

involving parishioners, at page 9, cases based on

custom, and His Lordship notes at about point 4 on

page 9:

There are plenty of other cases which show

that, in order to justify a person suing in a

representative character, it is quite enough

that he has a common interest with those whom

he claims to represent.

He refers to Warrick v Queen's College.

DEANE J:  Mr Basten, can I just divert you to something that

is worrying me and that is - I am obviously missing

something - but why would a declaration that the

variation agreement is null and void get your

client anywhere. Would you not have to go back to

the original agreement?

MR BASTEN:	Yes, there was one -
DEANE J:	I do not want to take time, I was just wondering

what I was missing.

MR BASTEN: Nothing, Your Honour. It was a point which was

raised in the Court of Appeal as a basis for saying

that, "That relief might not be beneficial to all

members of the class." It was a point which was

abandoned in the Court of Appeal without objection,

and the President, as he notes in his judgment,

would have given us leave to amend to delete that.

It was based upon a misapprehension by counsel, I

fear, who was confused by a particular section,

section 76 of the Act, which we do not pursue.

DEANE J: But, take your clients; I mean, why does it help

them to have a variation agreement?

MR BASTEN:  It does not. We do not seek to pursue it,

Your Honour.	We do not say that the agreement is
null and void.

DEANE J: Well then, why is it relevant to point to

difficulties in the variation agreement?

Carnie(2) 16 3/3/94

MR BASTEN: Because the variation agreement itself is on

foot; it constitutes a loan contract; it does not

have the required disclosures that section 36

requires of a loan contract; therefore their

entitlement under the contrQct is not to say it is

null and void, but that they do not have to pay the

credit charges.

DEANE J: But under the varied contract the credit charges

are the amount in excess of the total stated as the principal, surely? In other words, the past credit

charges are treated as if they are discharged by a

new loan?

MR BASTEN: Yes, that appears to be - - -

DEANE J:  Would there be anything in it?

MR BASTEN: Well, if Your Honour goes to page

DEANE J:  No I have taken you far enough; you have answered

my primary question.

MR BASTEN:  I think the answer is many thousands of dollars,

Your Honour, but the contract had three years to

run, in effect. After the variation, interest was

running throughout the three-year period. That

interest is not repayable if their substantive

argument is correct.

DEANE J:  So what the case is about is the credit charges

under the variation agreement in excess of the

increased amount of the loan?

MR BASTEN:	Yes, in substance that is so, Your Honour.
DEANE J:	Good, thank you.
MR BASTEN:	Your Honours, I think there is one more sentence

on page 9 in the speech of Lord Macnaghten, which I

was coming to; I may have referred to it. After

Warrick's case His Honour says, just at the end of

that paragraph:

All growers have the same rights. They all

rely on one and the same Act of Parliament as

their common charter.

Their rights under that Act, if I may interpolate,

are their rights as persons who fall within the
class of growers as His Honour says, "a fluctuating

and indefinite a body", but one which His Lordship

was sufficiently satisfied with as an appropriate

basis for a representative action, and the test he

applies in relation to that body appears at page 11

where, at point 3, His Lordship notes:

Carnie(2) 17 3/3/94

It was said that th~ growers are so

fluctuating and indefinite a body that it is

impossible to tell who is or who is not a

grower ..... I cannot say that I am much

impressed with that difficulty. It seems to

me that the description of the persons

apparently intended to be favoured by the Act

is sufficient for all practical purposes. It

may be difficult or impossible to compile a

catalogue of growers. But there cannot, I

think, be much difficulty in determining

whether a particular person who claims a

preferential right to a vacant stand in the

market is a gr·ower or not.

Now, in the present case we say that that

approach applies a fortiori to persons who are

represented by the class identified, and I think it

is perhaps sufficiently noted by the President in

his judgment at pages 344 to 345 that it is

difficult to imagine that in the present case it

would not be a matter of technological simplicity

to produce a list of all the persons. We cannot do

it but one would expect that the respondent could,

and even if that could not be done readily the

persons are identified as those who have entered

into a variation agreement in a particular form,

and it could readily be said of any person that

they fall within or without the class.

BRENNAN J:  Mr Basten, could I take you back to the answer you gave to Justice Deane a short time ago. In

Ellis v Duke of Bedford there was a statutory class right, was there not?

MR BASTEN:  Yes.

BRENNAN J: And therefore it was said that an action brought

by one person on behalf of the class, on whom the

right had been conferred, was a valid cause to

adopt, even though the class right was susceptible

of individual enjoyment. Now, in this case do we

not need to understand precisely what it is which

provides the relief which will flow to your client

in order to examine the nature of that right in

relation to other members of the alleged class?

I must confess for myself I did not quite

understand what you were saying about the

capitalized interest. I understood it to be in

breach of the statute that the interests had been

capitalized and added in the variation agreement

but I did not understand that the relief that you

were seeking affected the liability to pay that as

a principal sum.

MR BASTEN:  Yes, I think I did not express that well,

Your Honour. One needs to go to section 70. It is

Carnie(2) 18 3/3/94

actually encapsulated in the phraseology of the

Chief Justice where he said that this course of

capitalizing interest was not impossible under the

Act but led to consequences under section 70 The

consequence it leads to is that, and I do apologize

for not going more precisely to the provision.

Under 70(1) the Act says that:

The credit provider and the debtor under

a ..... loan contract may agree to vary the

terms of the contract in relation to, or to

payment of, the amount owing under the

contract if~ .

(a) the outstanding balance of the amount

financed at the date of the variation is not

increased by the variation or is increased

by -

an amount relating to insurance or registration

fees which does not bear upon the present question.

Once you fall outside that precondition, the

variation agreement becomes a loan contract because section 5 says it will be. One then looks at it as

a regulated loan contract and asks does it comply

with the disclosure requirements of section 36, and

the form of the variation agreement in use did not.

I identified one particular error, namely the

absence of an annual percentage rate on the

contract.

BRENNAN J: Yes, and what is the consequence of that?

MR BASTEN:	The consequence of that is that pursuant to section 42(1), the contract under 42(1)(b) is a
loan contract not in accordance with section 36 and
the debtor is not liable to pay the credit provider the credit charge under the contract.

BRENNAN J:	So that does not touch the principal sum?
MR BASTEN:	No.

BRENNAN J:  It is the credit charges which are levied upon

that principal sum under the variation agreement?

MR BASTEN: That is so, Your Honour, yes.

BRENNAN J:  And so it is said that in relation to the

variation agreements entered into by other members

of the alleged class, they will not have to pay the

credit charges indicated in their respective

variation agreements?

MR BASTEN: variation agreements, yes.

Carnie(2) 19 3/3/94

BRENNAN J:	I see.
McHUGH J:	Mr Basten, could I ask you a question wnich has nothing to do with your argument, but Esanda is a
subsidiary of a bank, is it not?

MR BASTEN: It is, yes, Your Honour.

McHUGH J: Which bank is that, do you know?

MR BASTEN:  The ANZ Bank, I understand.

McHUGH J: I was worried I might be a shareholder in a bank

of which it is a subsidiary, but it is not.

MR BASTEN:  His Honour the Chief Justice announced such a

concern at the beginning of the hearing in the

Court of Appeal and nobody objected but

Mr McDougall commiserated with him at the time.

Your Honours, in relation to the question of

identification of the parties, I was going to refer

to one other slightly cryptic document in the

bundle of papers at page 102. This was one of the

documents discovered as a result of the subpoena
and it is a computer printout, the relevance of

most of which I am quite unable to determine, but

the relevant passage is the material in the middle

which reads:

Letter sent to CCLC -

That is Consumer Credit Legal Centre -

enclosing copy all documents and variation

calculations.

Certain advice is noted, and then it goes on:

Carnie has commenced a class action in

Supreme Court on behalf of all borrowers whose

contracts have been varied. He is seeking

orders that variation is invalid. EHO -

which I take to be Esanda head office -

have established provisions for any losses in

credit charges as a result of decision.

Hearing unlikely -

and so on, which indicates that Esanda is quite

able to identify with decision the members of the

class.

So that, despite some comments by the

Chief Justice, it appears to us that the

identifiability of the class is far greater in this

Carnie(2) 20 3/3/94

case than it was in Bedford v Ellis and, with

respect, it is our submission that His Honour erred in concluding to the contrary at page 327. In that

regard, it is perhaps necessary to note that

His Honour went on to make a number of comments in

respect of that matter.

Firstly, at 327 at line 40, in the passage to

which I have referred, His Honour seems to adopt

the view that Bedford v Ellis is authority for the

proposition that there must be:

a readily identifiable class of person -

and he then says:

the interest is clear enough.

That must be understood in the sense that the

growers in Bedford v Ellis constitute such a class,

and that any member of the class may be identified

as such once they come forward.

At page 328, His Honour notes three

difficulties, I think, in relation to

identification of the class.	The first is at
line 20.	He says:
One manifestation of the difficulty

involved in identifying the common

interest ..... relates to the procedure that

would need to be followed in order to identify

the persons being represented.

That procedure he does not identify, but I have suggested that, at least in terms of the Bedford

test, there is really no difficulty in following a

procedure which would allow the identification,

certainly of person who comes forward.

Secondly at the bottom of the page, His Honour

notes that: 

Many of these persons, for their part, might

be entirely content with the contractual
arrangements they have made with the

appellant, and they might not be in the least

interested in finding themselves involved -

That is a matter to which I have already, I think,

indicated the answer that we would give, namely,

that the subjective contentment or otherwise does not relate to the juristic interest in the object of the proceedings, which is the test to be applied

under Part 8 rule 13 and, in any event, one might,

I think, legitimately ask - as the President did -

why it might not be said that they would at least

Carnie(2) 21 3/3/94

be interested in knowing whether they had a legal

obligation to the +espondent or whether they were

making a charitable donation.

DAWSON J:	What did the representative order say?
MR BASTEN:	In terms of the class, Your Honour?

DAWSON J: Yes.

MR BASTEN:  Your Honour, there was no representative order

as such. At page 315 the Chief Justice, at

line 20, states:

The issue ..... as whether the case is a

proper one for the making of a representative

order.

But that, with respect, is not really the

phraseology required by Part 8 rule 13.

DAWSON J: Well, some order would have to be made that the

plaintiffs represent who?

MR BASTEN:  The plaintiffs need to plead that in commencing

the action. In the absence of any order that the

action should not be continued, which is the

phraseology of Part 8 rule 13, one would not

anticipate an order until the end of the

proceedings. No doubt at the end of the proceedings the Court would need to make

declaratory relief or such orders as it thought fit

in terms of an identified class.

DAWSON J: That is what I am getting at. What would be the

appropriate order?

MR BASTEN:  The appropriate order would be in terms of the

class identified in clause 6 of the statement of

claim, in my submission.

TOOHEY J: But are you suggesting it would not be

appropriate for a defendant faced with a pleading

of the sort that is here to seek to strike out that

pleading on the grounds that there was not the same

interest, because the order - and it is envisaged

by rule 13(1) - is an order that assumes that the

same interest exists but for whatever reason

precludes the action from being continued on that

footing?

MR BASTEN:  Yes, it assumes that there are numerous persons

and that they have the same interest, I suppose;

there are two limbs to the test it sets forth. In

relation to the strike-out motion, in principle, it

is, of course, available because the court can make

such an order at any time. We would say that there

Carnie(2) 22 3/3/94

is a difficult in the court making an order in the

terms sought at a _stage where the pleadings have

not proceeded beyond the statement of claim and no

interlocutory steps have been taken and that it

would have been appropriate for the defendant to

plead before seeking the order. But that is a

matter for the respondent and, in fact, the stage

which the case had reached when the order was

sought was simply that there was a statement of

claim filed. The approach is open. There are

difficulties in dealing with the motion, I would

have thought, in that circumstance.

TOOHEY J:  Was there affidavit evidence before the court?

MR BASTEN:  Not from the respondent. I am subject to

correction. I do not think there was any

significant affidavit evidence before Master Hogan

when the notice of motion was first filed.	The
evidence which is now in the appeal book was generated in the course of the appeal before
Justice Cohen.

DAWSON J:	When one looks at paragraph 6 of the statement of claim, one wonders what one gains by representation
in that way because in order to bring yourself
within the class to obtain relief you have to establish the very things that entitle you to
relief anyway.
MR BASTEN:	One would have to establish one had a contract

with Esanda of a certain kind.

DAWSON J: Which was varied otherwise than in accordance

with section 70 of the Act.

MR BASTEN: Yes. If that is in a standard form that would

not be difficult to determine. One might say the

same of the growers in Bedford v Ellis.

BRENNAN J:  No, that was a class right.

MR BASTEN:  It was a class right in the sense that "a class"

was defined by statute.

BRENNAN J:  The right was conferred on the class by statute.

MR BASTEN: Yes, Your Honour.

BRENNAN J: Is that not the problem that you face, that here you right is the debtor is not liable to pay to the credit provider the credit charge under the

contract? That is the right which inheres in your

client, on your allegation. You say that the same

right severally resides in a number of others. In

Bedford v Ellis the problem was that the right was

conferred upon all growers and it was conferred in

Carnie(2) 23 3/3/94

relation to each of the sites within group (C), or

whatever it was in the market, but obviously each

one would have a capacity severally to enjoy it.

MR BASTEN: Subject to priorities amongst themselves, cne

might have thought.

BRENNAN J: Of course, yes. But the right that was sought

to be enforced there was precisely the right

conferred by the statute.

MR BASTEN:  Yes. There are two ways in which we approach

that. Your Honour worded the question, firstly,

saying that there were several rights in the

present case.	We do not have any difficulty with
that.	In the outline of argument at the top of

page 2 we have identified a number of cases in

which claims arising under separate contracts have

been permitted to proceed by way of representative

action; in subparagraph (3) where several claims
arising in tort have proceeded at least to a stage,

in Prudential Assurance, for example, by way of a

representative action. So the severalness does not

seem to us to put us outside the terms of the rule.

The question then becomes whether there is

anything about the source of the right and then,

with respect, one enters into an area of some

semantic difficulty in saying that in Bedford

growers were given certain rights by statute, but

that in this case borrowers of Esanda are given no

particular rights by statute. The right they seek

to enforce - that is perhaps not the right

phraseology for the civil penalty provision - but

it is a negative entitlement perhaps as opposed to

a positive one, but it arises under the statute.

And it is a right which depends upon the

identification of a common question of law, and it

being determined in their favour. That ultimately,

we say, is sufficient for them to join in these

proceedings as members of a class.

BRENNAN J:  So it means that if you fail, each of them is

estopped.

MR BASTEN:  Yes, that is so, and that would have been so in

Bedford.

DAWSON J: But if you succeed, all you get is a declaration

that any borrower whose loan agreement is not in

accordance with section 70 of the Act does not have

to pay the credit charges. That is not very

revealing.

MR BASTEN:  It may be extremely revealing, Your Honour.

There was a question about whether there is any

power in the court to require that notice be given

Carnie(2) 24 3/3/94

to those persons, but subject to that, for anybody

who seeks to identify their rights, they now have

established in a supreme court ruling that they do

not have to pay the credit charge.

DAWSON J: That is what the Act says.

MR BASTEN:  The Act says it in the abstract, Your Honour,

but if they go - - -

DAWSON J:  You are saying it in the abstract because you

first of all, to bring yourself within the

declaration, have to prove that you have a contract

which is not in accordance with section 70.

MR BASTEN:	The issue in dispute is whether or not these contracts are not in accordance with section 70.
DAWSON J:	But you will only be litigating the contract with

the plaintiffs.

MR BASTEN:  But the result in relation to contracts

formulated according to a common practice will be

the same, inevitably.

McHUGH J: Could you settle this case for various amounts of

money on behalf of different people?

MR BASTEN:	Not in relation to various amounts of money, Your Honour. In theory I suppose one could. In
practice these cases do not result in money orders
because final orders are stayed while the respondent goes to the tribunal to seek relief.
Section 42 does not give an absolute right not to
pay credit charges.  It gives one subject to
reinstatement, and one would expect that an
application for reinstatement would be made, so
that in a practical sense it may be that one never
gets to that question.
But in terms of the amounts which are not payable under the contracts a debt is created, one
way of the other, in relation to each particular
borrower who will be bound by the result. If we
fail then they will have to pay the credit charge;
if we succeed then, subject to an application to
the tribunal, they will not have to pay the credit
charge. It is a more complex answer perhaps than
the question deserved, but the practicalities may
require.

Your Honour Mr Justice Dawson was putting a

question to me in terms of the identification of

the class. I am not sure, as Mr Francey points

out, that Your Honour may have been doing it in

shorthand, but the phraseology adopted at page 11

is not simply that the variation agreement was not

Carnie(2) 25 3/3/94

in accordance with section 70; the phraseology in

paragraph (b) of paragraph 6 identifies the
particular way in which it is asserted that the

variation agreement does not comply. In other

words, based upon prima facie evidence of a common

calculation which was undertaken in a way which we

have described, but I am not sure that is more than

a refinement on what Your Honour was putting to me.

DEANE J:  Mr Basten, while you have been interrupted, can I

ask you: does the Credit Act apply to closed

transactions?

MR BASTEN:	Yes, it does, Your Honour.
DEANE J:	What provision is that, or has it been held that

it does?

MR BASTEN:  It has been held that it does; there is no - - -

DEANE J: Because it does not read as if it does; it keeps

referring to the "agreement is".

MR BASTEN:  Yes. I once sought to put that argument,

Your Honour, with lack of success, in a case called

Roberts v AGC. The tribunal - - -

DEANE J: Well, that is the case, is it?

MR BASTEN:  Yes. I can give Your Honour a reference after

lunch.

DEANE J:  Now, the other thing is, if you are purporting to

sue in relation to all people in a comparable

situation, regardless of whether their transactions are closed, and seeking an order for repayment, may

there not be extraordinary variations? I mean,

surely you can release the debt or you can be

estopped from enforcing it. There is nothing that

says that you cannot compromise the debt arising

out of the civil penalty.	I should have said, is
there anything which says you cannot compromise the debt?

MR BASTEN:  I am not quite sure that I have the answer to

your question, Your Honour, but it does seem to me

that in so far as the Act distinguishes between so

much of the debt as is capital and so much as is

interest, there is no power to compromise so as to

pay any amount of interest, if the civil penalty

applies, because that would constitute contracting

out of the consequence of the Act. The Act

requires that the penalty not being a benefit
except incidentally to the debtor but a forfeiture

imposed upon the credit provider - - -

Carnie(2) 26 3/3/94

DEANE J:  I follow that when the contract is on foot, but

when all that remains - when you have a closed

contract, even accepting that the Act goes back and

applies to it and creates a civil debt, I cannot

see anything that says the person in whose favour

that civil debt is created cannot release it or be

barred by ~he statute of limitations from enforcing

it or cannot be estopped by subsequent conduct from

recovering it.

What this, no doubt, only leads to is a query whether your class should be more narrowly confined

to people whose contracts are not closed, and in

reference to liability to pay instalments.

MR BASTEN J: Yes. I think the answer to that, Your Honour,

may lie in the correct analysis of section 157 in

respect of individual cases. If there is some bar

arising by law, for example, pursuant to the

statute of limitations, then that might - I do not

think that is likely to affect us yet, although the

matter has taken some time, but any agreement which
has the effect of compromising the effect of the

civil penalty, otherwise than by way of

determination of the commercial tribunal, would

fall within the section.

DEANE J: That would mean if you had an insolvent credit

provider the person could not compromise the debt.

MR BASTEN:  That may be so, yes.

DEANE J: Section 157 does not seem to say that.

MR BASTEN:  No. I am sorry, yes, Your Honour is giving an

example where, as a matter of law, there has been

some intervention in relation to the debt other

than by way of agreement between the parties to it.

I accept that that may give rise to consequences,

not that they apply in this present case but, in

theory, I accept that.

DEANE J:  I have taken enough of your time but my reaction

to 157 is that if you have a closed transaction

presuming, as you say, that this Act applies to it
at all, that the most that the Act would do would

be create what is identified as a civil debt and

that was the end of it.

MR BASTEN:  I have some difficulty with Your Honour's

phrase, "a closed transaction", because presumably

a transaction might be considered closed

immediately the capital is repaid.

DEANE J:  I meant everything repaid.

Carnie(2) 27 3/3/94

MR BASTEN:  If we are right in law that is everything which

is owiny-.

DEANE J: What I had in mind was when the parties said,

"This contract has run its course, everything's

paid, we close it and we put it away.".

MR BASTEN:	As a practical matter that may have different legal consequences in different situations; I
accept that, Your Honour. In the present case, I
do not feel troubled by the theoretical
possibilities because Your Honour's example of
insolvency does not apply. Esanda seems to be
solvent. There is no question of limitation periods running, as I apprehend, for these
particular persons.
I think perhaps what Your Honour is illustrating is the difficulty in any case of being
sure that the class which is identified at the
outset may not be subject to some amendment and
variation in the course of the proceedings. We
would not be troubled by that if it were
established, for example, in Bedford v Ellis that
the class of growers was actually intended by statute to refer to those who live in the County of
Middlesex or some such limitation then, no doubt,
the order at the end of the day would be limited in
accordance with the proper interpretation of the
statutory right.

DEANE J: All I was suggesting to you was this, that I can

see a difference between your saying, "Here we are.

Our contract is still open. We want a declaration

that we do not have to pay any credit charges, and

that applies to people in our position", and to

your saying, "Those things, that applies to people

in our position, and in so far as those people who

have paid it all off, put it in the bottom drawer and, under the Act, are entitled to a civil debt,

they are in the same position." It seems to me

they are in a completely different position.

MR BASTEN:  Yes. I understand that the result for them may

be different in monetary terms, depending upon

whether they have made the payment or not. In my

submission, their legal rights would not differ in

principle because, in the absence of a

determination under section 85 of the Act, which

will result in the variation of the liability under

the contract - that is what section 85(2)(c)

provides - then they do not have the liability to

make a payment of the credit charge or if they have

paid it then there is a debt owing to them for the

amount so paid. But a declaration of their rights

to that effect would not, in my submission, give

rise to difficulty in relation to the common issue,

Carnie(2) 28 3/3/94

which is whether or not credit charges were payable

under these contracts. That is the common issue

which we seek to have determined.

DAWSON J: Mr Basten, can I just ask one more question and

then I will be quiet? Let us say that you are

successful, you are allowed to pursue the action

and a representative order is made in terms of

paragraph 6 and I am a person who says that I am

one of the persons who was representated and Esanda

does not agree, what do I then have to do to get

the benefit of the judgment?

MR BASTEN:	It may not be a matter of whether they agree or not; they may simply refuse to pay you money or
assert - - -

DAWSON J: They do, they say, "You are not a person who was

representated" .

MR BASTEN:  Yes.

If Your Honour was owed money you would

need to sue in a court for a debt and no doubt you
would need to establish, as a matter of

res judicata, that you fell within the class

represented and would therefore - - -

DAWSON J: Which would mean I would have to establish the

non-compliance with the provisions of the Act, in

my case?

MR BASTEN:  You would have to establish that your contact

was one of those which fell within the provisions

of 6 ( b) , yes.

DAWSON J:  It is very hard to see how the representative order assists anyone really, is it not?

MR BASTEN: Well, as a practical matter I would have thought

that there might have been fewer difficulties in

establishing that than in establishing that you

were or were not a grower of herbs and vegetables
under the Covent Garden Market Act.	But there will

be those difficulties possibly at the end of the

day. One looks at it in the context though of this

legislation, where a credit provider would be

expected, where there was a breach, to go before

the tribunal and deal with the matters as a class

matter and receive class orders reinstating. Now,

one might say in that situation, which is expressly

provided for in the Act, that precisely the same

difficulties could arise in relation to any

contract. Realistically, those difficulties simply

do not arise.

TOOHEY J:  Mr Basten, why do you speak of a representative

order? The rule does not seem to contemplate a

representative order, does it? It just

Carnie(2) 29 3/3/94

contemplates that unless the court otherwise orders

persons with the· same interest may be the subject

of a representative action.

MR B~STEN:	Yes.
TOOHEY J:	I mean it is not just a semantic difficulty, but

it is - I just wonder how the rule would operate in

practice. It is quite different to some of the

more modern rules dealing with the class actions where the court is seized of the matter from the

outset and decides whether to give directions as to

notice and so on.	None of it is expressly dealt
with in rule 13(1).

MR BASTEN:	Yes.
TOOHEY J:	No doubt faced with an application that the court

should otherwise order, the court could give

directions of that sort. But historically how does

a rule like rule 13(1) operate? If no one chooses

to challenge, presumably the action goes on its way

and proceeds to finality in one form or another.

MR BASTEN:	Yes.
TOOHEY J:	And has the effect, one assumes, of binding those

who are sought to be represented by the action

itself.

MR BASTEN: Yes. That, in my experience, is what has

happened.

TOOHEY J: But the talk of a representative order seems to

be more akin to the type of order that would be

made in a true class action, where the court is

controlling the proceedings from the outset.

MR BASTEN: Yes. I accept that, and I think that was what I

was adverting to in relation to a comment I think

from Mr Justice Dawson earlier, when I went to the

passage at the beginning of the Chief Justice's

judgment where he phrased it in terms of a

representative order being the issue. My

submission is that it is not the issue, that is not

the way to look at this case.

TOOHEY J:	What it does throw up, I think, is that the court of Appeal has gone immediately into questions
which might arise once it has been demonstrated
that persons have the same interest, and use those
factors that might be said to determine that there
is not the same interest.
MR BASTEN:	Yes, I think that summarizes

Carnie(2) 30 3/3/94

TOOHEY J: It is, in one sense, putting the cart before the

hor3e.

MR BASTEN: Yes, well in my submission - - -

TOOHEY J: Because if the same interest exists then the

action continues on that footing unless the court

otherwise orders.

MR BASTEN: Yes, that is so. I - - -

TOOHEY J:  I am not sure where that leads us.

MR BASTEN: Well, it leads ·one, I think, Your Honour, to two

particular conclusions. One is that if one

approaches it in the way that the Court of Appeal

did, one tends to be deflected from the philosophy

which is set out in the speeches in Duke of Bedford

v Ellis and, in particular, that phrase to which I

referred in Lord Macnaghten's speech, that one must

seek to identify what is common to each member of

the class, not what divides them. That is at the

bottom of page 7, and the difficulty, if one seeks

to see what divides them or makes the class

difficult to identify members of at an early stage,

is that one does it without evidence and on a

speculative basis. We were faced with that

difficulty until we had some interlocutory

discovery. The second - - -

TOOHEY J: Well, I suppose one way of approaching it would

be, and I am not suggesting that this is the

correct approach, but a view could be taken that,

yes, the parties have - at least there are persons
having the same interest. The court then, by

interlocutory processes, determines who those

persons are, and invites them to respond, if they

wish to, to the continuation of the representative

action.

MR BASTEN: Yes, that would be a course which, in a

particular case, the court might well adopt, in our

submission, and -

TOOHEY J: But it seems to have been finessed here because

the Court of Appeal, it might be said, has taken

these considerations into account in determining

whether, in fact, the same interest exists.

MR BASTEN: Yes. Well, I respectfully adopt what Your

Honour is putting, and it is one of the reasons

which has caused a difficulty. Might I just link
what Your Honour is putting to me in relation to

the Court of Appeal's approach. I referred to the

passage on page 315 at line 20 where "the making of

a representative order" was identified, but there are also some passages in which the Chief Justice

Carnie(2) 31 3/3/94

adopts the phraseology which, I think, also

reflects something of the point Your Honour is

making, by r8ferring to this as a class action in

the Naken sei1se, or the North American sense, and I

would like to come back to that, if I may, in this

context.

But, just in respect of the way that

Your Honour was putting the question to me,

paragraph 5 of our outline does attempt to identify

the correct approach and it is, we would

respectfully submit, inconsistent with that adopted

in the Court of Appeal.

May I just take that next step and refer to

those passages where there seems to have been an
attempt to locate in this proceeding something of

the American class action which has, as Your Honour

noted, certain procedures which attach to it,

including the possibility of certification of a

class at the outset. At page 321 line 15,

His Honour said:

The present case represents an attempt to make

the rule the foundation of what is called in

modern times as "class action".

At page 323 His Honour comes back to that

phraseology at line 24 referring to the United

States experience, and then at page 324 line 15 through to 325 line 20 in particular, he follows

the same line of concern.

There are two difficulties that we have with

the approach His Honour adopted. The first - and I

will come back to this if I may - is that there

appears to be a reasoning implicit, and express

indeed, in what His Honour says that this kind of

action involves a level of complexity which

requires some detailed regulating provisions, such

as those in the Federal Court Act and elsewhere.

But the particular point that I was seeking to make

at this stage was that His Honour goes on at

page 325 to deal with the Supreme Court of Canada

decision in Naken v General Motors of Canada. I

think it is fair to say that His Honour ultimately

treats this case as one which falls within the

parameters of the Naken conclusion. In Naken, a

proceeding was brought in Canada for damages

arising out of the sale of a particular car, a

Firenza, by General Motors which, I suppose, was

something of a lemon. The difficulties in pursuing

that action are readily apparent.

Might I take Your Honours though to it,

because it seems to us to be a matter which is far

remote from the circumstances which the appellants

Carnie(2) 32 3/3/94

seek to pursue in this case. Firstly, in the

judgment of Mr Just:i.ce Estey he identifies a number

of cases in which Canadian courts had accepted that

representative procedures under a rule for all

purposes similar to ours might be supported.

At page 401, after referring to English law,

he notes that in the Alberta Pork Producers' case,
which is referred to at point 8 on the page, it was

accepted that persons marketing hogs under a

statutory scheme who were claiming that there had

been tortious intervention in the market giving

rise to an increase in the price of hogs had, "a

common interest" for the purpose of challenging

that conduct.

At page 402 at the bottom of the page,

His Honour seeks to comprehend that claim within

the common fund claims on the basis that the

payments in excess of what was properly payable

might be seen as constituting a common fund.

In a general sense, I suppose that is correct,

but the case bears significant similarities to the

case which we seek to pursue. Just while dealing

with that particular example, may I note that the

matter went on appeal - the Alberta Pork

Producers' case went on appeal to the Alberta

Court of Appeal after the decision in Naken and the

appeal was dealt with in terms of Naken and the

action as a representative action was upheld and

that is reported in 9 DLR (4th) 71. Their Honours

sought at page 75 in particular, to distinguish

Naken's case in a way which is clearly consistent,

in my submission, with the judgment of the Supreme

Court. That becomes apparent if you consider the

analysis of the facts in Naken, if I may go back to

that decision, at page 404 to 405. The difficulty

which Justice Estey notes at point 7 on page 404:

The difficulty raised by these

proceedings is that while the statement of

claim when amended will describe a group of

persons with reference to an identifiable

property, a Firenza, owned by each of those
persons at the commencement of the action, it

is not possible in so many words to take the

identification one stage further and limit the

group represented in the action as plaintiffs

to those who responded to the advertisements

of the appellant by acquiring an automobile.

This identification requires a procedure or a

determinative process of some kind. Thereby,
there arises a distinct difference between

this kind of proceeding and the simple

shareholder type proceeding -

Carnie(2) 33 3/3/94

and His Honour says:

The outcome of these proceedings will depend upon how one properly characterizes in law

this process whereby the identify of the

members of the represented group is

determined. If it is simply a labelling

process, as for example where a security
holder comes forward and presents the security

which is the subject of the action, then the

respondents clearly are correct in advancing

their rights under Rule 75. If, on the other

hand, the process is not so much

identification as the establishment of a

complete, independent cause of action, then

the appellant will succeed.

All I say in respect of that, and coming back

perhaps to what Your Honour Justice Deane put to

me, is that there is obviously an area for judgment

that is required to be applied by that test. In

the case of Bedford, somebody coming forward and

saying, "I am a grower", when that is disputed by

the other party, may need to put on evidence to
establish that. Similarly, we would say, in this

case, it may be, in the example Your Honour gave, necessary to put on evidence by way of a contract

showing certain things in order to establish that

they fall within the class. But that is very

different from proving, in effect, that one has

responded to an advertisement and relied upon it

which is at the core of the claim.

DAWSON J:  I am not sure that it is and what I was putting

to you was that the identification process here in

the end involves proof of your claim.

MR BASTEN:  Your Honour, in a sense, if I may say so, that

is true in every case.

DAWSON J: No, it is not. For instance, where negligence is

involved and you establish negligence for one and

for all, and it may be that an individual plaintiff

has to establish the amount of his damage but that

issue is settled. But here nothing is settled.

You have to prove your claim.

MR BASTEN:  Your Honour, the claim is put forward on the

basis that through a particular period the company

acted in a particular way based upon the guidelines

which they gave their employees for the calculation

of amounts under variations agreements and that

that is the common element which we needed to show,

on one view, to say that we had an appropriate case

for a representative action.

Carnie(2) 34 3/3/94

Once one establishes that there is a variation

agreement which h~s been varied during that period

according to that procedure which would flow, one

would think, from looking at the contract,

requiring very little more than noting that the

amount on the face of the contract simply does not

comply with what is required under 70(2)(a), that

is much closer to the labelling process which

Justice Estey in Naken accepts as quite appropriate

than it does to the process which the claimants in

Naken would themselves have had to go through.

I can see in Naken that one could readily say

that very little would have been established by a
class action. All that might have been established

is that one particular advertisement was or was not

misleading but that, in itself, although it might

be common to a number of cases, ultimately would be

a minor element in relation to establishing a cause

of action. If the whole of the judgment in Naken

is read in that way I think it is clear that this

is the problem which gave rise to the matter not

being allowed to proceed.

I draw Your Honours' attention to the passage

at page 408 point 7 through to page 409, and

perhaps at the last sentence on page 408, where

His Honour says:

On the other hand, it is equally clear -

and he is discussing the term "interest" -

from the terms of Rule 75 itself and the

context in which it appears ..... that it is not

enough that the group share a "similar

interest" in the sense that they have varying

contractual arrangements with the appellant

which give rise to different but similar

claims in contract relating to the same model

of automobile.

And so on. Then it refers to the possibility of

some having seen the advertisements and some not.

In our submission, that is a somewhat

different case from the circumstances we have

before us and our case is closer, in our

submission, to a number of Canadian cases in which

similar actions were upheld and I will not take

Your Honours to them. Shaw v Real Estate Board is

referred to by the President in his judgment, a

case in which real estate salesmen understood that

they had been the subject of an illegal assessment

by a board and sought repayment of moneys which
they had paid, even though the amounts they had

paid in individual cases might not be appropriate.

Carnie(2) 35 3/3/94

Chastain v British Columbia Hydro & Power Authority

along similar lines, where a security deposit had

been provided by people allegedly ultra vires.

The one case. that I would however take Your Honours to, if I may, is a more recent

decision of the Canadian Supreme Court following
Naken, which illustrates, in my submission, the approach which that court now adopts. It is Pasco

v Canadian National Railway Co, 56 DLR (4th) 404.

That is the reference which I will need to go to in

the British Columbia Court of Appeal. The case is

the subject of a brief reference in 63 DLR (4th)

606, where, in a judgment delivered orally by

Your Honour Justice McLachlin, there is merely an

affirmation of the approach adopted by the British

Columbia Court of Appeal in 56 DLR. The case

involved communal rights in the nature of native

title rights and perhaps ultimately is clearly

correct for that reason, but the approach which was

adopted and implicitly accepted, I would submit by

the supreme court, appears at page 413. The

approach is firstly to ask, is the purported class

capable of clear and definite definition?

McHUGH J:  Just stopping there. When you look at

paragraph 6 of your statement of claim, the class

is defined by paragraphs (a), (b) and (c) of that.

MR BASTEN:	Yes.
McHUGH J:	And if you look at the end process, the defendant

is required to determine the class by reference to

such things as to whether or not there were

regulated contracts within the meaning of the Act,

whether the contracts had been varied by an

agreement which did not discharge the original

contract, and amounts have been calculated in

particular ways. It seems extraordinary that you

are going to seek an order which, if it was

breached, you would ultimately want to enforce.

Would any court ever make an order along those

lines?

MR BASTEN:  Your Honour, in defining the order, is

incorporating the terms of the persons who were

members of the class.

McHUGH J: Well, by inference that is the represented debit.

MR BASTEN: 

Yes.

McHUGH J: 

One has to apply legal criteria to factual

matters, whether or not the agreements complied
with sections 35 and 36 of the Act.

Carnie(2) 36 3/3/94

MR BASTEN:	I suppose that is right in a sense, Your Honour, and I concede that there is an area of judgment
available and required, but when one comes to a case like Bedford the same, and perhaps more
difficult, judgments may be required in determining
who is and who is not a grower, and that was not a
matter which concerned the House of Lords in
determining that it was appropriate to have
whatever common questions there were that might
arise determined. The common question that we seek to have determined is whether a variation agreement calculated in this way, and that is how we say the
respondent on its own documents calculated it, is a variation agreement which falls outside section 70.
Now, if at the end of the day one needs to identify who falls within the class because we
succeed, one would start with the proposition that
any person who has a variation agreement entered
into in the particular period would prima facie be a member of that class, because that is the
commonality of the practice. That is how we say
that a representative action is appropriate because it appears, and it is not disputed, and therefore
in my submission should be assumed for present
purposes, that the company did treat everybody in
this common way.

If it appears in relation to particular

individuals that they fall within some furry area

which is at the edge of the class and there may be

doubts, then that would need to be determined. But

that would be true of the part-time market

gardeners or the people who were employing others to market garden for them and so on and so forth.

McHUGH J: But they are questions of fact as to whether

somebody is a grower or not. But your definition

of the class requires you to apply legal criteria,

to facts, to come to a particular conclusion.

MR BASTEN: In my submission, no, because once the criterion

which is to be applied to the variation agreement

is whether it capitalized interest. Now, that is

not really a legal question, one simply sees whether there has been incorporated into the outstanding balance of the amount financed which,

under section 45 of the Act - I think I am correct

in saying - the respondent is required to provide a

statement of from time to time if requested. It

really is just a simple matter of calculations,

seeing if the outstanding balance was exceeded when
the variation was granted and we would say that

since that was the practice of the company it is

almost inevitable that it would have happened in

every case. But, there may be some cases where

doubts can legitimately arise.

Carnie(2) 37 3/3/94

McHUGH J:  But there is an anterior question as to whether

or not a particular contract is a loan or credit

sale contract, is there not?

MR BASTEN: There is a question about whether the original

contract, prior to variation, is a regulated loan

contract, if that is what Your Honour is - - -

McHUGH J: Yes, and as to whether there is a variation?

MR BASTEN:  Yes. All of those are matters which would need

to be considered by the commercial tribunal in

making any order increasing or reinstating

liability. That is envisaged by this Act. At the

end of the day if the tribunal makes an order
reinstating liability, as it may well do in one of

the current cases, in relation to 250,000

contracts, one can imagine that there will be cases

where people will come forward and say, "My

contract did not fall within that class." But, the

Act envisages a regime under which those sort of questions need to be asked and answered.

Now, it may be that there is something in the

nature of this Act which makes it peculiarly
appropriate for such an action to proceed, which

does not apply in the general run of contractual

matters. I do not need to put it any higher than this, but under the Credit Act the simple fact of the automatic statutory application of the penalty

puts the contracts, in my submission, into a

particular class. It is a class which can be

acknowledged by a credit provider who simply comes

to the tribunal seeking an order interfering with
the terms of each of those contracts. It is a

class which cannot be established by any borrower,
other than taking this proceeding because there

happens to be no statutory procedure for a borrower

to get a declaration in the tribunal. Nor is there

any representative procedure available in the

tribunal.

McHUGH J: But, you are seeking orders that money be repaid.

I mean, supposing there is debate as to whether a
contract related to a commercial vehicle.	The
lender says, "Well, it was not a commercial

vehicle." Now, that is part of the definition of

the class. You are seeking an order that somebody

define a class, and if they fail to do so that they

should be liable for penalties for contempt of

court.

MR BASTEN:  Your Honour puts it in the sense that we are

seeking an order in relation to a class who will

necessarily require a level of definition and

precision before the order can apply to any

particular individual.

Carnie(2) 38 3/3/94

TOOHEY J: Surely it is open to the respondent if the action

proceeded and was successful so far as the
plaintiffs were concerned to say of any individual,

"They do not answer the description in paragraph 6

of the statement of claim.", therefore tl1e judgment
has no application to them, before you get to any

question of their standing before the tribunal.

MR BASTEN:  Certainly, or in any court where the debt is to

be considered. That also would be the stage at

which that question might arise. Your Honour,

there may be differences, of course, as to the

amounts which would arise in individual cases.

That, again, is something we would readily concede

at the end of the day. But the debt results from the express operation of section 42 which applies

to certain contracts which fail, as it says, to

comply with section 36. It is the operation of

that automatic civil penalty provision which we are

seeking to give effect to, as it were, by way of a

court declaration of right.

McHUGH J:  The whole weight of the argument in this case

seems to have been on the question, "common

interest", but what about the discretionary aspect of this case, "unless the court otherwise orders"? I know the President took the view that there were strong discretionary grounds but I must say I am

far from persuaded that is the case.

MR BASTEN:  Your Honour, that may well be so. That would

not trouble us in this Court though. We would say

that if we are entitled to pursue a representative

action in the sense that we satisfy the two
preconditions set out in Part 8 rule 13 then it

would be a matter for the trial judge or the master

or whoever to determine whether there are

particular circumstances in this case which

give - - -

McHUGH J: But one of the orders sought was that the action

be stayed. That must have been directed to the

question of discretion.

MR BASTEN:  There may be arguments about discretion which

just have not been reached at this stage. Nobody

is suggesting, I think, that this matter comes

before this Court in relation to the exercise of a

discretion. We say that we never got to the

question of discretion when we were thrown out at

the initial hurdle. If there are discretionary

concerns which arise then they will no doubt be

dealt with in due course and would not give rise to

any general question of public importance, one

would think.

Carnie(2) 39 3/3/94

BRENNAN J:	Mr Basten, could I just ask whether or not you found your argument precisely on what you have put
in paragraph 5 of your notes? In other words,
common issues of sufficient significance
establishes common interest, and it is unnecessary
to look for a common right or a common benefit
flowing from the remedy which might be granted to
give effect to a right.
MR BASTEN:	Yes, we do, Your Honour.

BRENNAN J: Well then, Naken's case becomes relevant only on

the question of the significance of the common

issues on your argument.

BASTEN J: That is so, Your Honour.

BRENNAN J:  So there is nothing by way of common right or

common remedy involved here? We are concerned only

with whether, if there is a common issue in this
case between your case and that of other potential

plaintiffs, you can bring a representative action.

BASTEN J:  I think I accept what Your Honour is putting to

me, but there is a distinction being drawn between

a common right and the common question.

BRENNAN J: Yes, to use your phrase "a significant question

common to all members". In other words, there is

an issue whether of fact or law.

MR BASTEN: Yes. There is an interest in the proceedings.

In other words, the interest is in the object of the proceedings rather than in the source of any

particular right.

BRENNAN J: Well, you would take it as far as saying that if

the case proves to be a precedent in terms of law,

or an indication of a finding of fact of comfort to

another potential plaintiff, then those other

potential plaintiffs can be joined, as it were, in

a representative action?

MR BASTEN: I do not put it as high as that, Your Honour.

BRENNAN J: Why not? Or perhaps I could put it this way:

subject to significance, why not?

MR BASTEN:  Because the object of the proceedings does

involve a claim for relief. It involves a claim

for relief based upon a certain factual matrix. It

would not be sufficient to say that a question of

whether one can reverse the onus of proof in a

motor accident case is a legitimate way of

proceeding by claiming in trespass would be a

common issue in all negligence claims pending in

the supreme court now. We do not put it, in a

Carnie(2) 3/3/94

sense, as high as that, which might be a matter

which would fall within the way Your Honour puts

it.

On the other hand, what Your Honour is

putting, I think, suggests that there may be a
blurring occurring between the principles of stare

decisis and res judicata in such a case as this.

That, we would say, in theory is probably true.	we
do not shrink from saying that.

BRENNAN J: What that implies, of course, is that if you get

it wrong and do not succeed in your action, you

have shut out from the relief conferred by the

statute on individual borrowers, the right to take

advantage of section 42.

MR BASTEN: In theory that is correct, because - - -

BRENNAN J: In practice?

MR BASTEN:  In practice one might ask whether those rights

would ever have been asserted by the borrowers,
depending on how much they were worth and the

nature of the cost of litigation and so on.

BRENNAN J:	I meant in terms of reality.
MR BASTEN:	In legal theory that is so, Your Honour, and on one view that is one of the benefits of the
procedure, because the respondent is then not as, as said in some of the older cases, harassed by a
multiplicity of litigation.  The respondent also
gets a benefit from that. There is an analysis in an article by Professor Yeazell which I think I
have provided a reference to in the University of California Law Review - - -

TOOHEY J: Just before you take us to that, Mr Basten, could

I just ask you, because it may bear upon the

article, are the words, "the same interest" treated

by you as synonymous with, "a common interest"?

MR BASTEN:  They are certainly treated in the case law as

synonymous. I am not sure what the two forms of

terminology could mean which would differ.

McHUGH J:  I was going to ask you an almost identical

question. Do you treat, "the same interest" as the

same as, "a common issue"?

MR BASTEN:  Yes, subject to the qualification that, "issue",

in a sense, perhaps has a broader connotation than

does, Minterest", but if the "interest" or "issue"

is defined in terms of its commonality by reference

to some specific conduct or procedure or stature,

yes.

Carnie(2) 41 3/3/94

McHUGH J:  On that basis, why could not all injured workers

at BHP, being injured by dangerous machinery, bring

an action together on the ground that there is a

common issue as to whether BHP is the occupier of a

factory where it has got dangerous machinery?

MR BASTEN: That, I think, was in terms of what

Justice Brennan was saying, whereas it might be open in abstract principle, would be an unhelpful

and unuseful exercise in attempting to resolve

disputes, and one would simply not allow such a

matter to proceed.

McHUGH J: But it would be·within the rule?

MR BASTEN:  Yes, in principle. in this sense, Your Honour, that one would need to It would be within the rule

show that there was a real dispute between workers

and BHP as to whether or not they were the occupier

of premises or whatever the question might be. But if that question were a serious question - and Lord Lindley, in Bedford v Ellis in the Court of Appeal

refers to the need to have a bona fide issue in

dispute - if there were that bona fide issue in
dispute between these people then it would, we

would submit, fall within the same category of

cases as determining whether an Act gives

preferential rights to stores in a market.

The example Your Honour gives of course is one where it is almost - it is most unlikely that such

a broad issue would arise in those terms, and

similarly Your Honour talks about dangerous

machinery. Well, one would expect that there would

be numerous people injured by different pieces of

machinery and there would be no commonality at all

there.

May I just perhaps summarize what I seek to - I note the time and I do not want to take the Court

through the detail of Professor Yeazell's analysis.

May I summarize what I wanted to draw from it in

this way, because it addresses what I think might

have been implicit in Your Honour Justice Brennan's

question about the other members of the class being

bound. One would not want them, in principle, to

be bound were there not some proper representation of their interests in the proceedings. That would

seem to be in principle wrong, in a case where they

are not a party and therefore not given the

opportunity to appear themselves.

The analysis that Professor Yeazell puts

forward on the basis of the English authorities

prior to Bedford v Ellis, and he really does not

extend beyond that period, is firstly that

representative actions arose in a medieval context

Carnie(2) 42 3/3/94

in which custom was the basis of the claim as

between parishioners and their vicar or whoever the

class might be. And it arose in a context which

predated the rigidity of the present necessary

parties rule and therefore which did not give rise

to the discussion of interest, in part because
there was no need to use it as an exception to a

rule and in part because there was, until 1701, an

assumption that representation would only occur

where there was express authority given by the

members of the class. Perhaps I can just refer at

page 516, to the case of Brown v Howard.

The second point that he seeks to derive from

the case law is that where the class was defined by
custom, there was indeed a merger in practice of

the doctrines of stare decisis and res judicata.

The third principle is that whilst the doctrine of

representation was originally based on a question

of consent, that expressed consent dissipated after the decision in Brown v Howard, referred to on page

516, and was supported by the development of an

underlying concept of interest; the interest

needing to be sufficient to justify accepting the decision achieved in litigation between one party

and another as supporting the belief that there

would be a complete and proper litigation of those

issues so that it would not be unfair or improper

to bind other parties. We would accept that the

term "interest" must be sufficient to bear that

weight.

So it is difficult in some respects to answer

abstract questions about how far one can go without

having the specific case. But that is the

principle which, we say, underlines the concept of

interest. And it is understandable in this context

that what one looks to is the object of the

proceedings, in order to define the necessary

interest, and that is not novel in our submission.

It is supported by the analysis which is set out in

the book by Frederic Calvert, of which I think

copies of relevant parts have also been included

for Your Honours and which I will not go to

specifically.

BRENNAN J:  I must say, Mr Basten, that from the little that

I have seen of these documents, they seem to focus upon the right or the substantive remedy which is

given to give effect to the right and require an

interest in that, but fall short of saying, where

you have got a common issue, that is sufficient.

MR BASTEN:  Yes. In one sense it is perhaps not profitable

to dwell too much on the history because things

have obviously developed since then, but it may be

of assistance to go to the more recent English

Carnie(2) 43 3/3/94

cases merely to illustrate the way in which that

has develop~d .. In the course of the judgments in

the Court of Appeal, there is reference to the

decision in Markt & Co Ltd V Knight Steamship Co

Ltd, (1910) 2 KB, a case which has been cited for two propositions, one of which it supports, the

other of which is perhaps is more doubtful. The

first proposition is that there is no power to
bring a representative action where there are

several causes of action arising in contract.

Knight was a case in which numerous people shipped

goods on the ship which was sunk and a question

arose as to the liability in relation to the sinking of the ship and the judgment of Lord

Justice Vaughan Williams at page 1026, makes it

clear that there was nothing in the pleadings in

that case, at about point 5 on the page, to

establish that although breach of contract was

alleged:

that the bills of lading and the exceptions

therein were identical or that the goods the

subject of the bill of lading were of the same

class either in kind or in relation to the
rules of war -

So the case is authority for the proposition that there must be a common element arising out of the

contract. The case is also cited for the

proposition that it would not be possible to bring

a representative action where the relief sought was

differential in the sense that damages might be

claimed by individual members in different amounts

and depending upon different circumstances.

That proposition certainly flows from the

judgement of Lord Justice Fletcher Moulton at
page 1040, but is not supported, I think, by

Lord Justice Vaughan Williams and certainly not by

Lord Justice Buckley, who was in dissent.

claims that it was impossible to have a cause of The judgment of Lord Justice Fletcher Moulton

action in a representative procedure based upon a

mere identity of the form of a contract or

similarity in the circumstances under which it has

been performed, that is at page 1040 point 7. The

questions which he raises in that passage are more strongly worded than in the judgments of the other members of the court, and have not been accepted in

more recent authority, but they do bear some

resemblance to some of the ways in which the case

against us has been formulated in the decision

below.

The judgment of Lord Justice Buckley is

perhaps instructive because it is more in line with

carnie(2) 44 3/3/94

the more recent trend of authority.	He says at
page 1047 at about point 2:

To apply this to the present case -

having discussed Bedford v Ellis:

In the question whether the owners of the

Knight Commander committed a breach of

contract or duty in shipping on the vessel

goods which were contraband of war all

shippers of goods which were not contraband of

war have the same interest. It is not

accurate to say that they have a similar

interest. They have exactly the same interest

although it will result in the case of each of

them in a different measure of relief.

And, at page 1048 he suggests an amendment which might have permitted the class to go ahead in

keeping with the principle which he defines.

Your Honours, that case has undoubtedly given

rise to difficulties in the bringing of actions by

way of representative procedure where they might

otherwise have been thought appropriate in England

and countries which have followed its authority.

Nevertheless, there was a case brought in 1921,

David Jones v Cory, (1921) LJR 302. A short report

in perhaps circumstances not entirely different to

those which Your Honour Justice McHugh is putting

to me. A claim was brought by representative

procedure where it was said that the safety lamps

in use in a colliery were not in accordance with
statutory requirements, and that the workmen were

justified in refusing to go to work, and claimed

damages resulting from their docked pay.

That was an allegation based, it was said,

upon an alleged statutory breach of duty which the Court of Appeal, by majority, held was appropriate for a representative action, and I have, I think,	supplied a copy of a typescript of the judgement,	if Your Honours' judgments are not legible. It
appears at the back.

MASON CJ: What about the later cases to which you refer in

the Court of Appeal, such as Prudential Assurance

and the judgment of Mr Justice Vinelott in that case, where he deals with the requirement for a

common ingredient. Now, many of the questions put

to you really centre on that, do they not?

MR BASTEN: Yes, they do, with respect, Your Honour,

and - - -

Carnie(2) 45 3/3/94

MASON CJ:  Now, what elucidation do we get of that

expression "common ingredient" from that case and

from Irish Shipping, and any other case?

MR BASTEN~ Well, two, Your Honour. Firstly, the phrase is

used in (1981) 1 Ch 255 at letter C, where

Justice Vinelott was, in a sense, reformulating the

test which he had deduced from Bedford and

subsequent cases, and he says:

The second condition is that there must be an

"interest" shared by all members of the class.

In relation to a representative action in

which it is claimed that every member of the

class has a separate cause of action in tort,

this condition requires, as I see it, that

there must be a common ingredient in the cause
of action of each member of the class.

That in the present case flowed from the statement which was made in support of the proposed

investment, so that the common ingredient in that

particular case was one which was ultimately not

going to provide relief to the individual members

of the class, but would determine whether the

circular which was sent to the shareholders was

tricky and misleading and contained statements

which were not true. After that matter had been

determined each member of the class would have then

required separate proceedings to obtain an

enforceable remedy.

MASON CJ:  So that the representative action would result in

a declaration that was common in terms of relief to

all the members of the class, and thereafter,

individual claims would take their own course?

MR BASTEN: That was what was anticipated, Your Honour.

That case has interest for two reasons: firstly, that it required an analysis which allowed

Justice Vinelott to avoid the binding authority of

Markt in relation to several causes of action

arising under contract. It is also instructive in

that it does not appear to have been relied upon by

the Supreme Court of Canada in Naken. It is not

referred to in the judgment in Naken, and the

timing is such that Naken's case was probably

commenced before that judgment was handed down,

although not before the Supreme Court dealt with

the matter.

MASON CJ: It proceeds along a rather different line anyhow,

does it not, from Naken, because the judgment in

Naken seems to lay emphasis on common fund, for

example? It does not move much outside that area.

Carnie(2) 46 3/3/94

MR BASTEN:  Certainly that is so in the discussion of the

preceding case law. I accept that, Your Honour.

The second case which Your Honour adverted to was

the Irish Shipping case, (1991) 2 QB 206, in which

on one view of it, the Court of Appeal departed '
expressly from the concepts accepted in Markt.

Certainly in the j~dgment of Lord Justice Staughton

which commences at 222 in this regard, he goes

through the preceding authority, refers at 226 to

John v Rees which was an unincorporated association

case, refers to Moon v Atherton, a decision of the

Master of the Rolls, Lord Denning, and says at

E to F:

That was quite contrary to what

Fletcher Moulton LJ had said in Markt & Co Ltd

v Knight Steamship Ltd, thus is the law

reformed -

from which we would derive the conclusion that one

may readily now in England adopt a representative

procedure in order to determine that much of an

action which is common to a class of individuals

who are numerous.

In the particular case of Irish Shipping, it

was one of a number of authorities dealing with insurance contracts where it might be said that

there were common elements beyond those which were

to be found in other contract cases, but the

statement by Lord Justice Staughton to which I have

referred suggests that Markt is no longer authority

in that country.

MASON CJ: Before you leave that page, if you go to page

227, the paragraph that commences half-way down

where, in a sense, you look to what is said in

order to get some flavour of the expression,

"common ingredient", it does seem that His Lordship

was placing reliance on the fact that by reason of
the leading underwriter clause it was possible to

regard these 12 individual contracts as but one

contract. How important was that in determining

that there was a common ingredient in that case?

MR BASTEN: That matter was considered in, I think, a later

decision of Bank of America v Taylor in which it

was said that the comments made in relation to

Markt by Lord Justice Staughton went beyond the

requirements of the particular case, but it was

held that there was not in fact a majority in

Irish Shipping requiring, as a precondition, that

there be a lead underwriter clause. So, I think
the answer to Your Honour's question is that it was

not seen as imposing that precondition in relation

to contractual claims and certainly there was no

criticism in any of this line of authority. In

Carnie(2) 3/3/94

fact, of the approach adopted by Justice Vinelott

in Prudential Assurance, it has been referred to

but not dissented from. So that, in my submJ.ssion,

the common ingredient approach which he has
identified in tort cases and which the Court of

Appeal has applied in the contract cases is

accepted law in England, and is consistent with

what we would say would be sufficient to allow us

to proceed, at least to declaratory relief in the

present case.

Your Honours, I did not wish to take the time

of the Court dealing with the full range of the

Canadian cases. Might I hand up by way of

supplementary submission a summary of the

authorities which seem to have bearing on this

point, decided in Canada.

MASON CJ: Yes, thank you.

MR BASTEN:  Might I also refer briefly, in relation to other

authority, concerning contracts to the decision of

Justice McGechan in the High Court in New Zealand

in R.J. Flowers Ltd v Burns, (1987) 1 NZLR 260, in

which in a discussion at pages 269 line 18, where

His Honour refers to Prudential Assurance v

EMI Records through to His Honour's reference at

the bottom of page 271 to John v Rees, it appears that the New Zealand High Court has now adopted a

similar approach to that which, in my submission,

is to be derived from the English authority. I

refer at the top of page 2 of the general written

submission to two Malaysian authorities which also

adopt a similar approach in relation to contractual

claims. I will not take Your Honours to those.

There is another and separate matter which

follows from the judgment of the Chief Justice

below, namely the reliance that His Honour placed

upon the need to have some form of legislative

amendment before one could deal with these sorts of

cases, given the complexity of the litigation to

which they would give rise. His Honour referred in

passing to the Federal Court Act and the amendments
in Part IVA thereof, as being an example of the

kind of statutory intervention which was required.

In relation to that, we would make two submissions:

firstly that, whilst in cases which might fall

within the Prudential Assurance or Markt or Naken

area, there may be benefit to be derived from

having specific statutory provisions, but those

provisions have not been found to be necessary

either in England or, in my submission, in other

states in Australia. For example, there is I think

on the papers which were handed up, a copy of the

South Australian Rules which show that

South Australian practice has already been adapted

Carnie(2) 48 3/3/94

to try to overcome the limits which were understood

to be imposed by Markt Steamship.

The practice indicates that it is sufficient,

at rule 34.01, that "numerous persons have common

questions of fact or law requiring adjudication".

That, with respect, we would say is little more than a formulation of "the same interest" test as

particularly raised by Markt as to whether

it has now come to be interpreted in the case law.

proceedings could continue where there was a

question arising by way of separate cause of action or by way of relief for damages. Those two matters are both addressed in 34.03 and, interestingly, the

practice note suggests that Irish Shipping would

really have rendered those provisions unnecessary

now.

Our point is that there is nothing of detail

in relation to the rules provided for in South

Australia although the intent of the rule maker is

quite clear that a more liberal form of approach is

permitted than that permitted in Markt.

Secondly, in relation to the Federal Court Act

in Part IVA, although there are now statutory

provisions which make some explicit reference to
matters which are dealt with in many forms of
representative action, it is not correct to say,
with respect to the drafters, or perhaps it was not

intended, that they provide a complete code for

complex litigation of this kind.

Indeed, the only discussion of note in relation to how the Federal Court Rules proceed is

to be found in the decision of Justice French in

Zhang de Yong v Minister for Immigration, an unreported decision handed down on 6 October 1993,

a decision to which I need not take the Court in

detail, except to note that the complexity which

His Honour was concerned with in a judicial review	application concerning the manner in which refugee
applicants, boat people, had been considered gave
rise to complex questions of the interrelationship
of the principles of res judicata and Anshun's
case, matters which obviously are relevant in all
sorts of representative actions but which are
certainly not dealt with in the present Federal
Court procedures. There is a discussion in
His Honour's judgment of the underlying common law decisions, at page 26 and following.

The third point we make, by way of response to

the difficulty which His Honour the Chief Justice adverted to below, is that there may very well be merits in a representative action in positively

Carnie(2) 49 3/3/94

reducing the complexity of litigation. In the

Commercial Tribunal of New South Wales when cases

are heard, some form of notice is given to

potentially interested borrowers of the

proceedings, and one can only say that it would be

a disaster if borrowers responded to the

proceedings and came forward in an attempt to

exercise their rights to be heard.

I had mentioned before, one case presently

others involved several thousands of contracts.

before the tribunal involving 250,000 contracts; process, in my submission, is a diminution of the control given to individuals especially in relation

to complex litigation over the manner in which that

litigation is conducted. And there is, in the bundle of papers, a reference to a decision of Chapman v The Chief Constable, reported I think

only in The Times report but adverted to in the

white book UK Practice in which Mr Justice Steyn

indicates the extent to which the dominus litis

principle, as commonly thought to be applicable to

parties, is now being whittled away as the

"sporting theory of justice" as he calls it, is

really no longer tenable when one is dealing with

complex litigation involving many people before the

courts.

One of the purposes of a representative action

is to avoid the need for that complexity of

litigation and to ensure that persons whose

interests are affected are dealt with in one single

proceeding.

Your Honours, the only other thing I wanted to

say in relation to the test of interest arises from

a separate line of cases which do not go to the

tort and contract cases directly but involve the
unincorporated association of which the English

decision of John v Rees, a decision of

Mr Justice Megarry, is the prime modern example.

May I refer to the decision in (1970) Ch at 345.

The judgment commences at 366. It is, as

His Honour says, a tale of three meetings, at 366D.

But the important passages are to be found at page 370E through to page 371 at the foot of the
page, and in particular a passage at the top of
page 371 where His Honour notes the importance of

seeking to resolve in representative proceedings

issues which are in dispute between members of a

branch of the Labour Party.

The importance of this case, in my submission,

is not merely the statement made at 370F that the

rule is not a matter to be treated as a matter of

rigid principle but a flexible tool of convenience,

Carnie(2) so 3/3/94

has been extended to the extent that the interest

which is sought to be preserved is as broad as the

interest that a club member may have not only in

determining the fate of property of the club, but in determining the validity of the appointment of

officers, and that such interests can only

realistically be identified as bearing their class

action quality when one considers the proposed

outcome of the proceedings, because the interest,

although it is an interest held in common with

others who may be said to be members of a club and

therefore have a composite network of contractual

relations, nevertheless it is unrealistic to

suppose that that pre-existing juristic

relationship is what gives rise to the propriety of

a representative action in such cases.

It is obvious that in cases where there is a common issue to be determined, in my respectful

submission, this is the appropriate form of action

to pursue. I note the time, Your Honour. I think
that there may be one or two short points. Would

it be convenient if I collected my thoughts over

lunchtime.

DEANE J:  Mr Basten, could I just delay you for a second.

Could I take you to pages 318, 319 and 320 of the

appeal book where Chief Justice Gleeson

conveniently sets out the pleadings and the claim.

Looking at the claim, as I understand it,

declaration lB goes out. Is that right?

MR BASTEN: That is so, Your Honour, yes.

DEANE J: And the only declaratory relief, so far as

represented debtors, is in paragraph 2?

MR BASTEN:	Yes.
DEANE J: Can I ask you this:	if a person comes within the

definition of "represented debtor" in paragraph 6,

does it automatically follow that declaration 2

applies as a matter of law?

MR BASTEN:  Subject to an application pursuant to section 85

of the Act, yes, by virtue of section 42.

GAUDRON J:  Does it not depend on a determination of law as

to section 70 though? Is there not an intermediate

step?

MR BASTEN: 

The determination of law in relation to

section 70 is the substantive issue that we would
seek to litigate. The identity of the debtor

falling within the category depends upon the amount

financed in his or her contract being calculated

Carnie(2) 51 3/3/94

otherwise and in accordance with section 70, to use

a shorthand, by capitalization of interest.

DEANE J: Well, that was what I was asking.

MR BASTEN:  Yes.

DEANE J: If conditions (a), (b) and (c) are shown to be all

satisfied, does it or does it not automatically

follow that declaration 2 is subject to other

things that one can envisage appropriate?

MR BASTEN:  Yes, in my su~mission, yes.

DEANE J: Is not that a bit of a problem? I mean, if in the

proceedings are you not really saying - are you not

really saying, "We want people who are not liable

to pay the credit charges to be represented

debtors, so that a declaration can be made that
they are not liable, and we define the represented
debtors in a way which automatically means they are

not liable."

MR BASTEN:  May I answer it this way, Your Honour. The

issue which will be determined in the proceedings,

in whatever form it goes ahead, is whether persons

whose contracts were varied in this way have

contracts varied in breach of section 70 or not.

That is the hotly disputed issue of substance.	The
respondents says, "We have not gone outside
section 70, we document all our variation

agreements in accordance with section 70, and our

calculation of the balance of the amount financed

is permissible under section 70." That is the

matter which is in dispute, and which needs to be

determined. Once that matter is resolved then the

declaration would follow and would appropriately

bind all members of the class.

DEANE J: So, your answer to me, I might have misunderstood

it -

MR BASTEN:	No, I think it was too cryptic.
DEANE J:	- - - should have been, we would say that if

conditions A, Band Care satisfied, declaration 2 is appropriate; that that is the issue in the case.

MR BASTEN: That is the issue in the case.

DEANE J:	I follow that.
MR BASTEN:	And a lot of the material, which I would not

dream of taking Your Honours to at pages 184 and

subsequent, which shows complex calculations, is as

I understand it, designed to show that the company

has not breached section 70 at all, and their

Carnie(2) 52 3/3/94

claim, I presume, will be that Rose v Esanda was

wrongly decided by the Victorian tribunal in so far

as it held otherwise.

DEANE J: Then, I do not want to go where we are not

concerned, but why would one not then ask, well, if

all that is involved in the case is that abstract

question of law, why on earth would you complicate
the case by all these proceedings about represented

debtors if you reached the matter of discretion?

MR BASTEN:  It is not in the appeal books, but exhibit A in

the proceedings was - perhaps I can hand it up if it is not otherwise available - was an attempt by

my instructing solicitor to seek undertakings that

the company would act in a certain way if the

matter was run as a test case and the issue was

determined against - - -

DEANE J:  We are really moving into class actions when we

start looking at it in this way, are we not, in

that you are moving away from the interests of the

plaintiff and you are really talking about the

interests of a consumer organization or a solicitor

who wants to, as it were, vindicate some public

interest, or mount a class action for people that

he has no relationship with. That is not said

critically, incidentally.

MR BASTEN:  I understand what Your Honour is putting. In

general terms I accept it. In terms of the way in

which the proceeding was designed, though, there

was an attempt to avoid this issue being litigated

by having the matter determined as a test case and

everybody treating it as such. That is a step

which is taken in the English product liability

cases frequently by direction.

DEANE J:  I follow that, but it just seems to me that in the

interests of these plaintiffs their interests in a

personal sense would have obviously been infinitely

better served by a simple action without any of

these complications.

MR BASTEN:  In a practical sense, they might or they might

not, depending upon whether legal aid was

available, and they have no assets to run their own

litigation. The company is resisting the claim.

They might never have been able to run it.

DEANE J: Well, it is a matter of he who pays the piper, is

it?

MR BASTEN: It may well be so.

Carnie(2) 53 3/3/94

MASON CJ:  We will adjourn.now, Mr Basten, and resume at

2.15.

AT 12.52 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM

MASON CJ: Yes, Mr Basten.

MR BASTEN:	One correction and two very brief points if I may, Your Honour.
Firstly, I am not sure that it has any bearing but I did hand up exhibit A as I said, just before
the adjournment.  The document I handed up was a
letter referred to in exhibit A and not exhibit A.
I should correct that, I think, and set that record
straight.
The first of the two points of clarification is this: I may not have been entirely clear when I
explained the issue to be determined this morning.
As we understand it, the issue and the only issue
to be determined is whether the method of
calculation of what I might call the capital
payable under a variation agreement is calculated in accordance with the requirements of section 70.
I say, I think it is the only issue and that it is in dispute. There is no defence, so at this stage the respondent has not indicated otherwise than
informally that it disputes it and has not raised
any other issue.  It is not therefore the common
ingredient but the only real ingredient in the case for determination and it is a matter which affects
the interests of the plaintiff and each other
member of the class.
The second point that I wanted to clarify- briefly was in relation to identifying class
members.  A number of questions suggested to me
this morning that there might be various respects
in which the identification of a class member could be controversial. In the abstract that is undoubtedly correct. In the abstract it is clearly true to say that there may be difficult problems in identifying a regulated contract. If there are
such problems they may arise in odd cases. It is
the business of this credit provider, working in
this area, to know what is and is not a regulated
contract. It has not suggested that it would have

Carnie(2) 54 3/3/94

any difficulty in identifyinq who is a class member

in the way we have defined the matter.

At page 45 of the appeal book there is an

affidavit of Mr Wills who is a senior officer of

the respondent. At paragraph 12, he says, in

relation to another proceeding:

In July 1987, I perused approximately one hundred contracts regulated by the Act; they

were contracts where there had been

variations, and I was checking them to check

whether the variations had been carried out in

accordance with the Act.

And so on. That is the only evidence. If the respondent wishes to assert that there is some

difficulty in identifying persons in practice in

accordance with that class it would have been open

to it to put on evidence. It has not done so. At

this stage it would be premature to dismiss the

class aspect of the proceeding on that basis.

Those are my submissions.

MASON CJ:  Mr Basten, could I just ask you - it no doubt

reflects my ignorance - what is the Consumer Credit

Legal Centre Incorporated?

MR BASTEN:  It is an incorporated body which provides legal

advice and assistance funded by Commonwealth and

State and the Legal Aid Commission to persons with

problems in the area of consumer credit law and

financial services. If the Court pleases.

MASON CJ: Thank you. Mr Hely.

MR HELY: If the Court pleases. Your Honours, before coming

to the matters which have been covered in our

outline of submissions, I would like to address,

for our part, the question which Justice Deane put

to my learned friend a little before lunch, that is

to say, the interrelationship between the

assumptions upon which the class is constituted and

whether relief would automatically flow if those

assumptions were made out. In order to do that I need to ask Your Honours to come back through the

Credit Act and I need also to look at the

pleadings, but if I could have that indulgence,

Your Honours.

Section 70 is essentially a section which

creates permission - a person who may vary a credit
contract if the variation is effected in accordance

with the provisions of section 70. If one does act

in accordance with those provisions, then

subsection (5) operates and, notwithstanding other provisions of the Act, the variation agreement, if

Carnie(2) 55 3/3/94

in conformity with section 70, is not deemed to be

a loan contract .. So there is no question of

contraventions of section 70.	One either complies
with it or one does not.	If one does,

subsection (5) is enlivened; if one does not, it is

not.

One then goes back to the definition of

"loan contract", and it must be a contract, that is
to say a contract for consideration, which has
particular characteristics; relevantly the

characteristics referred to in paragraph (c) and

paragraph ( d) .

The first issue that one would have to confront, in determining whether the variation

agreement was itself a loan contract, would be

whether there was consideration for it or whether

it was simply a forbearance. Can I illustrate the

potential significance of that point by reference

to the two classes defined in the statement of

claim. Could Your Honours please turn to page 11

paragraph 6(b) and to paragraphs (i) and (ii),

which are expressed to be in the alternative.

All of the discussion this morning has been

about the paragraph (i) class. There has, I think,
been no mention of the paragraph (ii) class.

Certainly so far as the paragraph (i) class is

concerned, the probabilities are that if one fell
within that class there would be consideration for

the variation because one is increasing the amount

financed; in this case from 22,000 to 24,000, and

interest accrues on the higher sum. But in the

second case all that is said to strike down the

variation agreement is that there is non-disclosure
of default charges, and that is all that one is
told about; transactions that fall within that

class.

It is perfectly clear that if default charges

were not disclosed in the variation agreement, it

would not be in conformity with section 70 because

section 70 requires that disclosure to be made.

But it does not follow from the skeletal

specification in paragraph (ii) that the so-called

variation agreement is itself a contract, or that

any credit charges are payable under it. So there

would be in the paragraph (ii) instances a very

real threshold question as to whether transactions

falling within that class came within the

definition of "loan contract" in the first

place.Then one has to go to section 30 - - -

BRENNAN J:  I am sorry, I am not with you there, Mr Hely.

Paragraph (a) identifies contracts with a

Carnie(2) 56 3/3/94

variation, does it not?	I am sorry, the beginning
of paragraph (b):

each of which contracts has been varied by an

agreement -

does that not fall within paragraph (c) of the

"loan contract" definition?

MR HELY:  If it is an agreement in the sense of an agreement

for consideration, yes, but what I am submitting,

Your Honours, is that in the case of (b)(ii), the

postulation that it is an agreement for

consideration is something that may generate real

factual issues.

Subject to one qualification to which I will

come in a moment, the way in which this class has

been constructed is such that any declarations that

were granted with respect to the class would be

almost devoid of content because it simply says

that the Act has the operation which it has in the

circumstances to which it applies. So that the way

in which the class has been constructed conceals potential problems rather than exposing them and

throwing up an issue.

BRENNAN J:  How could it be a contract without

consideration?

MR HELY: It cannot be.

BRENNAN J: It is said to be a contract.

MR HELY:  It is but there is no fact specified which would

establish what the consideration was or where it

came from. The only fact in which one is told

about the paragraph (b)(ii) contract is that there

has been a non-disclosure of default charges which have accrued under the original contract. That is

all one is told about it.

Your Honours, then one comes to section 30(2)

which excludes from the definition of "loan

contract" the loan contract which has particular

characteristics. Again, because the class has been

defined in terms of regulated loan contract, that

obviates the necessity for inquiry as to whether

these characteristics are satisfied or whether they

are not.

Section 36 would then require, with respect to

the variation agreement, the various disclosures

referred to in it. That may give rise to a

question as to whether one simply looks at the

variation agreement itself or whether one looks to the antecedent contract to which it refers and, in

Carnie(2) 57 3/3/94

a sense, which it partially incorporates. So that

there may be a question as to whether it is proper
to look at both documents or simply one and, if one

looks at both, whether taken together they contain

the section 36 disclosures.	One then comes to
section 42(l)(b) where:

One then comes to section 42(l)(b) where:

a loan contract is not in writing ..... or is

not in accordance with section 36;

the debtor is liable to pay to the credit provider
the credit charge under the contract. And of
course, the loan contract with which we are

concerned for section 42 purposes is the variation agreement because it is that agreement which comes

within paragraphs (c) and (d) of the loan contract.

We would agree that if a variation is not in section 70 and if all of the other conditions to

which I have referred have been satisfied the

consequence of section 42 is the credit charge as

imposed pursuant to the variation agreement would

not be recoverable subject to section 85.

Perhaps as a practical illustration, just

taking the contract in this case, if one goes to

page 23, perhaps 225 if it is clearer in

Your Honour's copy, one can see that the credit charges originally imposed were $12,641. If one

comes back to page 25 one can see that the

additional credit charges by reason of the

variation are $7,529.84. If section 70 does not

apply and if all of the other sections to which I

have referred do apply then we would agree that the

effect of section 42 is, putting it shortly and

perhaps lightly inaccurately, that there is a civil
penalty in relation to the $7,529.84 but not in

relation to the $12,641.

TOOHEY J:  Is there a difficulty, Mr Hely, beeause no

defence has been filed? It may be, for i~stance,

that there are other answers the respondent would

wish to make to the statement of claim.

MR HELY:  We would submit not. Perhaps could I say this in

partial explanation of that: if one goes to the

statement of claim and, in particular, to

paragraph 5 which is on page 10, what it alleges is

that because the variation agreement did not comply

with the requirements of the Credit Act the

plaintiffs are not liable to pay to the defendant

the credit charge under that agreement.

As we read it, that is referring - again if I

can do so simply for reasons of convenience,

Carnie(2) 58 3/3/94

although I am told by those who know more about

this area of the.law than I do that it is

mathematically complex - we would take that to be a

reference to the 7000 not to the 13,000. If that

is right and if all the other conditions are

satisfied it would follow, it would seem, that

section 42 would operate in relation to the 7000.

Where that would leave you in terms of

repayment, and the like, would depend upon some
perhaps complex factors. Whether there could be

any order for repayment would depend, firstly, upon

whether the amount financed had been repaid or not.

If it had not, there would be no occasion for repayment of overpaid interest, it would simply be

set off against the amount financed.

Another factor which could be relevant would be the entitlement of the credit provider to charge

default interest on the credit charges payable

pursuant to the original contract and to set those

off either as an equitable set-off or pursuant to

the statute against the claim for refund of

interest. So, the actual working out of any

particular declaration in the precise circumstances

of a case could involve some mildly complex

questions of accounting.

TOOHEY J: Yes, I was not thinking of the mathematics so

much but whether there might be an answer to the

plaintiffs'claim which did not depend upon

calculation, for instance, that the agreement did

not fall within the Act at all.

MR HELY: There could be, but out complaint about the

statement of claim is that it does not through up

those issues for determination. By reason of the

definition of the class, it excludes them from

consideration. That is one of our fundamental

complaints about seeking to use a class action in

these circumstances because it determines nothing

of utility because, until one determines issues of

the type that Your Honour put to me, one simply

cannot know who has the benefit of this order and

who is entitled to enforce it.

BRENNAN J:  Mr Hely, if the variation agreements referred to

on page 10 were particularized in accordance with

paragraph 6 on page 11, assuming that is the

particulars that they wish to furnish - - -

MR HELY:  I have made that assumption in their favour.

BRENNAN J:  Yes. What would there be to stop you disposing

of this action at least as between yourself and the

plaintiff on demurrer?

Carnie(2) 59 3/3/94

MR HELY:  Did Your Honour mean because of the form of the

pleading?	I think there is a	slight problem about
demurrers	in New South Wales;	I think we have
abolished	them.

BRENNAN J:	I am not sure what your procedure is these days.
MR HELY:	I take Your Honour's point.
BRENNAN J:	Would there be anything to stop you simply demurring and saying there is no relief to which
you are entitled on those facts?
MR HELY:	So far as this particular plaintiff is concerned,

in one sense, depending on how benign a view one
takes of pleadings and what inferences one can draw

from them, it may be said that these facts are

implicit in other facts such as, as Your Honour put

to me a moment ago, an allegation of an agreement
but certainly, if one were to apply a strict

pleader's approach to this statement of claim, in

so far as it is a claim by the plaintiff against

the defendant, it certainly has the potential for

the course that Your Honour suggests.

BRENNAN J: Is that in issue? Is that a point in issue

between yourself and the plaintiff, that legal

point which would be determined on demurrer?

MR HELY:  Your Honour, we have put these matters relevant to

the question of the propriety of a class action, or
a representative action, whether or not they would

successfully found some proceeding against the

plaintiff in the nature of a demurrer.

BRENNAN J:  I am not quite sure whether I am following that.

My question is designed to elicit this: leaving aside the representative nature of the action, if there is a legal question which is in issue between

you and the plaintiff, which appears on the face of

the statement of claim, can it not be disposed of

immediately? The next question will be: and if

that question, however you might put it, can be disposed of on demurrer, then do we not need to inquire whether those other persons in the alleged

class have the same interest in that subject-

matter.

MR HELY:  I take Your Honour's point. It was I who was not

following Your Honour rather than the reverse, if I

may say so. We submit that this statement of

claim - I am sorry, can I go back a step.

Paragraph 5 simply says that the credit charges, under the variation agreement, are forfeited in

accordance with section 42. Subject to the other

matters I mentioned we would agree that if section

42 is enlivened that is its effect.

Carnie(2) 60 3/3/94

The vice in declaration (2) on page 11 is that

it is not confined, as is paragraph 5. It simply
says that one does not have to pay any credit
charges in relation to contracts as varied,

presumably whether they accrued or were payable

under the original contract or not. So that there

is no symmetry between the complaint in paragraph 5

and the relief in paragraph 7. So that we do not

see this statement of claim as drafted as throwing

up a legal issue between us and the appellants as

to whether section 42 operates in relation to the totality of the credit charges or, in the example

earlier given, whether it simply relates to the

7000.

If there were such an issue then it would be a

question of the proper application of the Act to

the particular contracts in question. we would

submit that that is purely an issue between

plaintiff and defendant and whilst others may have

a similar position they do not have an interest or

the same interest as the plaintiff in the

resolution of that issue.

If I can come back to Justice Deane's question

and endeavour to answer it - - -

DEANE J:  I have not quite follow what you have just said.

What if paragraph 5 were varied to say of the

plaintiffs what is in 6(a), 6(b)(i) and 6(c), would

that remove your present argument?

MR HELY:	No.
DEANE J:	You would then have the complete correspondence.
MR HELY:	No, the problem is not there.  Can I endeavour to

put it this way: if there were an issue between
plaintiff and defendant as to whether section 42

operated to forfeit and not just the 7000 but also

the 13,000, that would clearly be an issue of

statutory construction and the application of the
statute to the specific contracts.	My point is

that because paragraph 5 is cast in the way it is,
it simply asserts that section 42 operates in

relation to the 7000.

DEANE J: But that is what Mr Basten said in relation to the

represented debtors.

MR HELY:  Yes. If it simply operates in relation to the

7000 we would agree that if section 42 is enlivened

that is its operation in relation to everybody.

DEANE J: But that is not what I asked you. What I said was

cut out paragraph 5 and put in a paragraph

referring to the plaintiff and repeating 6(a),

Carnie 61 3/3/94

6(b)(i) and 6(c). You then have correspondence.

Is there an issue between you as to whether a case

that falls in 6(a), 6(b)(i) and 6(c) enlivens

section 42?

MR HELY:  A case that falls within 6(a), 6(b)(i) and 6(c)

enlivens section 42 - I agree.

DEANE J: In other words, whether there has been a failure

to comply with the requirements of the Act.

MR HELY:  I agree that if 6(a), 6(b)(i) and 6(c) are

established, then section 42 is enlivened. So in

that sense, because of the way in which the class

is constructed, it assumes all the matters that

need to be established and it does no more than

specify what the operation of the statute is in

relation to circumstances upon which it operates.

DEANE J:  In other words, it took all the years to come to

the High Court for Mr Basten to find out that he

has been wrong about what the dispute is all about.

You would think you might have told him at some

stage in the last three years.

MR HELY:  As I understand it, what the dispute has been all

about is insistence, which I attribute to

Mr Basten, but Your Honours would understand the

sense in which I put that, that proceedings that my

clients contend are not the appropriate vehicle for

representative procedure should be conducted in

that way.

DEANE J: But your client, as you understand it, could now

write to Mr Basten's clients and say, "We agree

that if 6(a), 6(b)(i) and 6(c), then the effect of

the Credit Act is as you say in declaration such-

and-such.

MR HELY:  Except that we would not agree with the

formulation of any of these declarations here.

DEANE J:  I follow that. Obviously there could be cases in

which section 85 orders have been made, and so on.

MR HELY:  But it says in relation to the contracts as

varied, so that what he seems to be saying is,

"Because you did not comply with section 70 under

the variation contract pursuant to which the

charges went up by $7000, the consequence is that

you lose both the $7000 and the $13,00, the $13,000

being payable pursuant to an otherwise pure

contract".

As I read the statement of claim, leaving aside order 2, Mr Basten is not asserting a

Carnie(2) 62 3/3/94

forfeiture of the $13,000 as well as a forfeiture

of the $7000. As I listened to his submissions

this morning I did not understand him to be

asserting that, except to the extent to which it is

pregnant in the formulation of order 2, and the

consequential orders that follow on from that.

Of course, if it were to be contended - and we

suggest it is not - but if it were to be contended

that the consequence of non-compliance with
section 70 was that you forfeit not just the $7000

but also the $13,000, there would be a very real

legal issue between us on that.

Your Honours, it was this type of

consideration that caused us to put for

Your Honours' consideration what we have put in

paragraph 5 of the outline. We referred there to

Naken, 144 DLR, and the particular passage is on page 405. Perhaps if I could go back to the bottom

of page 404, it is said:

The difficulty raised by these

proceedings is that while the statement of

claim when amended will describe a group of

persons with reference to an identifiable
property, a Firenza, owned by each of these
persons at the commencement of the action, it

is not possible in so many words to take the

identification one stage further and limit the

group represented in the action as plaintiffs

to those who responded to the advertisements

of the appellant by acquiring an automobile.

This identification requires a procedure or a

determinative process of some kind. Thereby,

there arises a distinct difference between

this kind of proceeding and the simple

shareholder type proceeding to which I have

already adverted. That, of course, does not

decide the issue for or against the

respondents. The outcome of these proceedings

will depend upon how one properly

characterizes in law this process whereby the

identity of the members of the represented

group is determined. If it is simply a

labelling process, as for example where a

security holder comes forward and presents the

security which is the subject of the action,

then the respondents clearly are correct in

advancing their rights under Rule 75. If, on

the other hand, the process is not so much

identification as the establishment of a

complete, independent cause of action, then

the appellant will succeed. It is not enough,

in order to come within Rule 75, simply to be

able to string together a series of similar

claims against a common defendant.

Carnie(2) 63 3/3/94

We would submit that applies here.

DEANE J:  Mr Healy, I have probably been slower than usual

and I do not want you to comment on that.

MR HELY:  I will resist the temptation, Your Honour, for a

number of reasons.

DEANE J:  Can I ask you this? Is there dispute between you

and the plaintiffs as	to whether the Credit Act has
been complied with in	relation to their
transaction?

MR HELY:  I do not know whether there previously has been

dispute between ourselves and the plaintiffs as to

whether the Credit Act has been complied with in

relation to their transaction but I cannot - - -

DEANE J: But is there is no dispute between you and the

plaintiffs, from your point of view, that if they

can establish they come within 6(a), (b)(i) and (c)

that they are entitled to some relief.

MR HELY:  I would agree that section 42 would apply in

relation to them subject to section 85. My client

could intercept their entitlement to relief by

making an application to the tribunal.

DEANE J: Well then, is it correct to say that putting to

one side 6(b)(ii) because of the problems you have

identified there you concede that if the plaintiff

is one of the represented debtors, that is 6(a),

(b)(i) and (c), it is entitled to the application

of section 42 that the dispute is whether it is one

of the represented debtors?

MR HELY:  If one says that if the plaintiffs can fall within

6(a), 6(b)(i), 6(b)(ii) and 6(c) then, subject to

section 85, section 42 applies. But then the

question is what are the financial consequences

which that position produces as between the

plaintiffs and the defendant. That would at least

involve a consideration of the extent of payments

of principal sums, default charges - - -

DEANE J:  I follow that. I had in mind an adjusted

declaration to the effect that the loan contract is
one to which section 42 applies or something like

that - there is breach and section 42 applies.

MR HELY:  I cannot dispute the proposition that if they can

bring themselves within the paragraphs that

Your Honour has been putting to me section 42 must

apply because the statute says so.

Carnie(2) 64 3/3/94

DEANE J: Well, then to the extent there is dispute, it is

whether the plaintiffs come within the class they

define as the represented debtors.

MR HELY:  No, the principal dispute is whether the

plaintiffs are entitled to bring this action on

behalf of anybody other than themselves.

DEANE J: That is the wider dispute; I was pointing at the

narrow dispute in terms of what is in actual
dispute, and is it that? It is conceded that if

the plaintiffs come within a class they are

entitled to some relief. The dispute is not

whether that class is entitled to relief, it is

whether the plaintiffs come within that class.

MR HELY:  I have some difficulty in putting to Your Honour

that whether they come within that class is capable

of serious disputation because whilst I have not

checked it off myself, my impression, from what I

have been told, is that the plaintiffs would have

little, if any, difficulty proving that they fall

within those classes. So that a direct answer to

the question that I think that Your Honour is

putting to me as to what this case is all about is

a question, essentially - - -

DEANE J:  Mr Hely, could I just press you a little more and

then I will desist. Is what you are saying this,

that there is no real dispute in one sense between

your client and the plaintiffs in relation to the

plaintiffs' case. The dispute is whether you

should be forced to go through all these procedures

to identify everybody else and have a fight with

all the other people who the plaintiff says are in

a similar position to it?

MR HELY:  That is one element. The second element is that

the financial consequences, as between the
plaintiff and the defendant of section 42 applying,

are by no means or by no means necessarily

repayment to the plaintiff of what it wants or

anything like it. But essentially - - -

DEANE J:  So what you say is, even if the plaintiff is

right, you would dispute that you owed it any money

as distinct from it still owing you money.

MR HELY:  I think that is the position, Your Honour, yes,

and that we also say that, consistently with what

this Court has said in Neeta (Epping) Pty Ltd

v Phillips and other cases, that the issue between

us is who owes who what; that issue should be

determined and one ought not to use declarations as

to steps in the process of reason in coming to that

conclusion to avoid the fact that that is the

issue, because this - - -

Carnie(2) 65 3/3/94

DAWSON J:  And you say that even i~ they got the relief in a

representative sence, they would not establish who

owes who what.

MR HELY: Precisely. But even so far as they are concerned,

in an individual sense, to make a declaration as to
something is simply to declare a step in the
process of reasoning, leading to the ultimate

conclusion, which conclusion is not dictated by the

declaration. And then, as Your Honour says, if one

looks at it in a class sense, the utility is even

less because one has to examine all of the facts,

examine and establish the causes of action on the

part of members of a class in order to prove that

they fall within it.

BRENNAN J: That only raises this problem, does it not, that

if this is a step in the linkage of reasoning

leading to the conclusions between yourself and the

plaintiffs, and the plaintiff says, "That link is

common in our case and in all the other cases that

have represented plaintiffs", whether in the
exercise of a discretion the Court should say,

"there should be no representative order" as

distinct from answering the question whether that

common link, in all the cases, is sufficient to

establish what is called a common interest?

MR HELY:  We would submit not. Could I ask Your Honours to

look at Part 8 simply for the purpose of drawing

attention to distinctions between different types

of rules. I am sure that Your Honours are familiar

with these, but Part 8 rule 2 is concerned with

joineder of plaintiffs in proceedings and that is

Part 8 rule 2, which is concerned with joinder of causes of action rather than a joinder of parties

and it says in paragraph (a) where if there are

separate proceedings there would be common

questions of law and fact and:

proceedings ..... are in respect of or arise out

(ii) all rights to relief claimed in the

of the same transaction or series of

transactions; or

(b) where the Court gives leave -

then you can join different causes of action. But

there are two criteria that have to be satisfied so

far as paragraph (a) is concerned: first is common

question of law or fact; and, second, your same

series of transactions.

The scope and purpose of Part 8 rule 13 is not

a joinder of causes of action, but representation

of absent parties. The jurisdiction under rule 13

only operates if one can find people who have the

Carnie(2) 66 3/3/94

same interest in proceedings. So that Part 8

rule 13 has a different scope from Part 8 rule 2,

which is directed to the joinder of causes where

there is sufficient commonality between them.

It was that sort of distinction which was

considered by this Court in Payne v Young, 145 CLR

at 609, which is referred to in paragraph 2 of our

submissions. That was a case in which people who

had paid inspection fees were joined as plaintiffs

in the one proceedings - so it is a rule 2

situation rather than a rule 13 situation - seeking

a declaration as to the invalidity of the

legislation pursuant to which the fees were paid,

coupled with an order for their repayment.

Mr Justice Aickin, on page 611 in the second

paragraph, said:

I do not think it can be said that the

claims for sums of money are for relief in
respect of or arising out of the same

transaction or series of transactions ..... The most that can be said here is that the claims arise out of similar transactions or several

series of similar transactions. I do not

think that the rule can be extended to cover

such a case.

At page 614, in the judgment of

Sir Garfield Barwick, His Honour said, at the top

of 614:

Quite clearly, each plaintiff has a common

interest with each other plaintiff in the

claim that the inspection fee is invalidly

imposed.

Then, a little further down:

But the relief claimed in the action is

not confined to a declaration of invalidity.

Each plaintiff claims against a defendant a

sum of money representing the amount of
inspection fees which have been paid by that

plaintiff to that defendant. No plaintiff has

any interest in the money claim of any other

plaintiff, nor is any defendant concerned with

the amount claimed against any other

defendant. A right to recovery of the money

sums is individual to each plaintiff and

particular to the appropriate defendant.

If I can perhaps skip the next two sentences:

Thus, it would be right to say of each

plaintiff that its money claim arises out of a

Carnie(2) 67 3/3/94

series of transactions, that is to say, his

own transactions with a particular defendant.

At the bottom of that page:

But I am quite unable to see how the

transactions of each plaintiff with a

different defendant can be treated as a series

of transactions within the meaning of the

rule, however liberally one might construe and

apply it.

Then Your Honour Justice Mason, on page 615 at the

bottom of the page, said this:

Each plaintiff therefore has a separate cause

of action against a particular defendant for
the inspection fees which he seeks to recover,
no other plaintiff having an interest in that

cause of action or in its subject matter.

Then, on 616, at the bottom of that page,

Your Honour discussed possible variations in how

one would construe the particular clauses and

Your Honour came to the conclusion on 617:

that separate causes of action vested in

several plaintiffs arising out of different

series of transactions -

cannot be within the High Court equivalent of the

New South Wales rule 2. So we would submit that

that being so the claims of this plaintiff and

those that it seeks to represent could not be

joined together as plaintiffs pursuant to rule 2

because they do not arise out of the same

transactions or series of transactions.

DEANE J: But the High Court rule said that, whereas the

current rule does not.

MR HELY:	I am so sorry?
DEANE J:	The High Court rule said that, did it not, whereas

the rule we are concerned with does not say it.

MR HELY: Rule 2 which is concerned with the question of

joinder of causes of action says it. Rule 13 is

directed to a different question. What I am
putting for Your Honours' consideration is that

according to the decision in Payne v Young the

plaintiff and those who it seeks to represent could
not join together as plaintiffs in one set of
proceedings seeking to recover moneys from these
defendants because their contracts arise out of
different transactions and I submit for

Your Honours' consideration that if they could not

Carnie(2) 68 3/3/94

be joined as plaintiffs it is inconceivable that it

could be said th_a,t they have the same interest so

as to enable those who could not be joined to be

represented.

In paragraph 3 of the outline of submissions

we put for Your Honours' consideration that in

determining the scope and purpose of rule 13 one
can get some assistance from its genesis and its

genesis was the rule of chancery which required the

presence of all persons interested in the

subject-matter of a suit subject to its power to

enable the absent to be represented when a joinder

would defeat the object of the exercise.

In Templeton v Leviathan Pty Limited, (1921)

30 CLR 34, the Court was concerned with the

operation of a Victorian rule which appears on

page 57 of the report at about point 4.	The Chief
Justice said that:

The respondent relies on the provisions of

Order XVI r 9 which provides that "where there

are numerous persons having the same interest

in one cause or matter, one or more of such

persons may sue or be sued, or may be

authorized by the Court or a Judge to defend
in such cause or matter on behalf of or for

the benefit of all persons so interested."

So, it is not precisely in the same form as

rule 13, but it is to the same effect.

Sir Owen Dixon was counsel for the appellant.	On
page 43, four lines up from the bottom, he
submitted that:

r 9 merely gets rid of any question of non-

joinder.

On page 76 that submission, we would respectfully

submit, appears to have found favour because

Mr Justice Starke, commencing at the bottom of

page 75 in the last two lines, and going over to

the rest of page 76, summarizes what the chancery

practice was, and it is roughly as I have

indicated, and at about point 6, His Honour said:

r 9 simply applies the practice of the Court

of Chancery to the Supreme Court of Victoria;

it does not, in my opinion, enlarge the

principle of representation acted upon in the

Court of Chancery.

We would submit that when rule 13 talks about

"same interest" it is talking about or describing a

person who has such a connection with the claim of

the plaintiff against the defendant that

Carnie(2) 69 3/3/94

consistently, with the ordinary Chancery practice, that claim cannot be effectively determined unless

that person is joined or represented. That, we

would submit, is the scope and purpose of rule 13

indicated both by its origins and by the conception

of "same interest". If one does not fit within

that description, in my submission, one is not
talking about the same interest, at best one could

be talking about a similar or an analogous

interest.

Your Honours, we have referred also to

Duke of Bedford v_Ellis but I did not propose to take Your Honours to the particular passages, we have given reference to the citations to them.

Daniell's Chancery Practice, at the pages I have

terms as Mr Justice Starke. Second, it makes the point that the representative action was an exception from the proposition that all necessary

indicated, simply propounds two propositions.

parties had to be present.

And thirdly, particularly at page 172 and 213

to 214, which I may take Your Honours to, the point

is made that people who have distinct and several

interests cannot sue as co-plaintiffs, let alone be

the subject of representative action. At page 213,
towards the bottom of the page, there is a

discussion of circumstances in which inhabitants of

a particular district can file a bill on behalf of

themselves and other members of the district to

compel water supply, and this statement appears: This form of suit cannot be adopted where each

of the class on behalf of whom it is

instituted has a separate demand in equity;

and, therefore, a suit by a shareholder in a

joint stock company, on behalf of himself and
the other shareholders, seeking relief from

the shares, and the return of the deposits, on

the ground of fraud or misrepresentation in

the prospectus, cannot be maintained; for the

case of each person who has been deceived is

peculiar to himself, and must depend upon its

own circumstances;

And then at page 255, at the bottom of the page,

there is a discussion to the effect that people who

do not have interest in the suit cannot be joined

as defendants and the authors say:

The rule, however, that persons who have no

interest in the litigation cannot be joined in

a suit with those who have, applies equally to

prevent their being joined as co-plaintiffs;

and upon the same principle, persons whose

Carnie(2) 70 3/3/94

interests in the subject-matter of the suit

are distinct and several, cannot sue as co-

plaintiffs.

So we would submit that neither in equity nor at common law prior to the Judicature Act could

persons who had separate and distinct interests

join in the same action, let alone be represented by others who are parties to that action and that

one really has to look to rule 2 type circumstances

to enable the general law position to be displaced

and that simply permits joinder not representation.

Could I take Your Honours briefly to a

decision of Mr Justice Tadgell in Marino

v Esanda Finance Corporation Limited,

(1986) VR 735.

This is another moneylenders' case in which,

as appears from page 736 line 16, a particular

person sought to sue as representative of all other

people who had entered into moneylending contracts

within a particular period for a determination that

they were void because interest in excess of the

statutory rate had been charged.

Section 62(l)(c) of the Victorian Supreme Court Act is set out at the top of page 736, and it

I suppose represents Victoria's first and most

spectacularly unsuccessful attempt to come to grips

with the problems of class actions and joinders.

What it said was:

"Where provision is made by any Act, law

or rule for two or more persons to be joined

in one action as plaintiffs -

one can represent the rest. So the proposition was

that in reliance upon that reform this plaintiff

could represent all other people who were in like

position. On 739 at about line 37 this appears:

Counsel for the plaintiff did not

seriously argue that O 16, r 9 could assist

him -

and Order 16 rule 9 is the Victorian equivalent of

Part 8 rule 13. But then he sought assistance from

Order 16 rule 1 which is the equivalent of the New

South Wales rule 2.	On page 740 at about line 5,
His Honour says:

The two agreements into which the plaintiff

entered with the defendant were personal to

him and were of no concern at all to any other

member of the "plaintiff class".

Carnie(2) 71 3/3/94

Then he refers to Stroud v Lawson and to what

Your Honour the Chief Justice said in Payne v

Young, and comes to the conclusion that one does

not have the same or similar series of

transactions, but to quite separate transactions,
thus there was no jurisdiction to join plaintiffs

under any operative Victorian rule, and therefore

the section had no application.

Your Honours have been referred to

Markt & Co Ltd v Knight Steamship Co Ltd, (1910)

2 KB 1021. If I could take Your Honours to a

couple of passages that we submit are if assistance

in the judgment of Lord Justice Vaughan Williams on
page 1030 at about point 2 or point 3.

His Lordship says:

The case of each shipper must to my mind

depend upon its own merits.

And then a little bit further down that page he

says in effect, if I could summarize it, that just

because you can bring yourself within the New South

Wales rule 2 does not mean that you can bring

yourself within the New South Wales rule 13 because

the two are concerned with quite different subject-

matters and the two have quite different purposes.

On 1035 at about point 8 the same point is

made by Lord Justice Fletcher Moulton and he refers

to a joinder as opposed to a representative action

and he says that:

These modes of procedure are entirely distinct in character, and the cases to which they are applicable are widely different -

and they are dealt with by different rules.

On 1038 at about point 6 His Lordship makes

the point that the effect of the rule in question

equivalent to rule 13 was to extend the common law But here a word of caution is necessary. In	practice to the supreme court as a whole:
extending it the rule also formulates it.

His Lordship says in effect that one has to look at the rule and construe it and just because something

would have been permitted in accordance with the

chancery practice, it will not be within the rule

unless it is interest of the same kind and vice

versa.

On page 1039, at about point 4, he talks about

plaintiffs who seek to represent others, being

self-elected representatives of the others, he does

Carnie(2) 72 3/3/94

not get their consent, and so on. Then, at about

point 6, His Lordship says:

The essential condition of a representative

action is that the persons who are to be
represented have the same interest as the

plaintiff in one and the same cause or matter.

There must therefore be a common interest

alike in the sense that is subject and its

relation to that subject must be the same.

T:;.en, on 1040, at about point 2:

It may be that the claims are alike in nature,

and that the litigation in respect of them

will have much in common. But they are in no

way connected; there is no common

interest ..... I can conceive no excuse for

allowing any one shipper to conduct litigation

on behalf of another without his leave, and

yet so as to bind him. The proper domain of a

representative action is where there are like
rights against a common fund, or where a class

of people have a community of interest in some

subject-matter. Here there is nothing of the

kind.

It is contrary to proper practice.

In point 6, I have referred Your Honours to

page 290 of the appeal books simply because it

indicates that two people who would otherwise fall

within the paragraph 6 class have taken

proceedings. The document appears at page 249.	It
indicates that two of the people, otherwise within the description of a class, have taken proceedings before the credit tribunal under section 146 which is the provision which enables the tribunal to
reopen, in effect, unjust contracts and those
proceedings were compromised within the tribunal. We refer to that simply for the purpose of
illustrating that complications of the type

referred to by His Honour Justice Deane can exist

across a wide spectrum if one is seeking to

represent people of whose identity one is ignorant

and of whose circumstances one is totally unaware.

So far as the more recent English decisions

referred to by my friend are concerned,

particularly Prudential and particularly Irish,

could we put these propositions: firstly, they

occurred in a totally different factual context

which is quite remote from the present; secondly,

they were all cases in which the persons permitted
to be represented could have been joined as

plaintiffs had application been made under rule 2;

third, none of those cases purported to, nor could

Carnie(2) 73 3/3/94

they, change the law; fourth, there are expressions	,
within the cases as to the operation of the rule
which, in our respectful submission, are simply not
justified by its terms and that this Court ought to be guided by the terms of the rule and by its genesis, scope and origin and its relationship to
rule 2, rather than by statements by other judges
in different contexts as to what its content is.

For example, on page 245 at about letter E,

Mr Justice Vinelott points to the origin of the rule and says that because it now applies to

situations to which it did not apply before, it

must be applied by way of analogy. We can readily

accept that. But on page 252, for example, and

perhaps at the bottom of page 251, His Lordship

says:

First, no order will be made in favour of a

representative plaintiff if the order might in

any circumstances have the effect of

conferring on a member of the class

represented a right which he could not have

claimed in a separate action or of barring a

defence which the defendant could have raised

in such proceedings. Secondly, no order will

be made in favour of a representative
plaintiff unless there is some element common

to the claims of all members of the class

which he purports to represent.

We would submit, with respect, that that is just

not a restatement of the conception of same

interest; there is a statement of a different

conception and of much wider and less certain

alteration and one should not have recourse to what

His Lordship there says in preference to the terms

of the rule itself.

One finds the same thing on 255 where His Lordship talks about a common ingredient.	We
submit that it is not sufficient to find something

which is common, one has to see an identity of

interest in the proceedings. An identity of

interest in the proceedings is not established if

tangentially or at the circumference interest
touch.

In so far as the Irish case is concerned, I make the same submissions, and without taking

Your Honours to them, unless Your Honours would

wish to be taken, could I give a reference in

particular to pages 227, 231, 235, 240, 241, 242

and 244 in the various speeches where

Their Lordships make it plain that their decision

in that case was heavily influenced or dictated by

two considerations. The first was that there was,

Carnie(2) 74 3/3/94

as a matter of substance, a single insurance of the

one risk, albeit by different contracts. Secondly,

each of those contracts was interconnected by means

of a leading underwriter clause. So that, we would

submit, the more recent English decisions do not

provide any assistance.

Can I endeavour to put our position this way?

We submit first, that the parties sought to be

represented have no interest of any type in the

contractual arrangements existing between the

plaintiff and the defendant. If that submission is

accepted that is ~he end of the matter.

Second, we submit that Part 8 rule 13 should

be confined in its operation to cases where the
person sought to be represented is a necessary

party to the resolution of the dispute between the

plaintiff and the defendant. If that is wrong, we

submit that there has to be some limitation of what

can constitute a same interest and, we would

submit, that at the furthest extremity the

limitation should be found in those who could be

joined as plaintiffs in the same proceedings.

Finally, we submit that it is an abuse of the representative procedure to use it in such a way

that until individual causes of action are

determined one cannot tell who it is who has the

beneficiary of whatever determination is made in

those proceedings.

I hope I have put this, but would Your Honours

forgive me if I am repeating something I have

already said, and it comes back to the question

Justice Deane was putting to me and, I think also

His Honour Justice Brennan, that if there were a

claim made by this appellant pursuant to

section 42, either by way of equitable set off or

by way of counterclaim, we would seek to propound

against the appellants whatever entitlement we have

to recover the amount financed to the extent to

which it has not been repaid, plus our entitlement

to recover default charges with respect to the

unpaid instalments due in relation to that amount

financed, plus the credit charge under the original

contract, and it is only when one goes through that

process and work out what pops out the other end,

that one can determine who is entitled to judgment

against who, and for what amount. Those are our submissions, if the Court

pleases.

MASON CJ: Thank you, Mr Hely. Mr Basten.

Carnie(2) 75 3/3/94

MR BASTEN: Briefly if I may, Your Honour. I promised

Your Honour Mr Jµstice Deane a reference to the

case in which I had sought to argue the closed

contract point and failed. It is AGC v Roberts,

(1989) Australian Consumer Sales and Credit Law

Cases, case No 55, 950, and the passage in the

judgment is at page 58690 to page 58691.

The short points in response to Mr Hely, if I

may, are four: firstly, in relation to the
question of the terminology of section 6(b)(ii),
the intention of the two alternatives was to cater

for the situation asserted by the respondent, that

in including amounts above the amount financed in

the balance of the amount financed outstanding,

they were incorporating default charges not unpaid

credit charges. On the basis that that

terminological dispute might have some relevance we
formulated 6(b) in two different ways, both of
which, I think it is accepted, would constitute a

breach of section 70.

In relation to the calculation of credit

charge, I think there may be an ambiguity that my friend is seeking to elucidate in relation to the difference between the phraseology of the variation

agreement and the contract as varied; that is an

infelicity. The intention is only to allege that

the credit charge under the variation agreement

falls foul of the civil penalty provision. The

consequence of that, however, is not as Mr Hely

says, that the $13,000 credit charge under the

contract prior to variation is payable, but only so

much of that credit charge as had accrued to the

date of variation. The $13,000 is the

predetermined credit charge which would accrue were

the whole period of the contract to run unvaried.

So I think it is an amount of $5500 which is in

issue, and that appears at page 27 of the appeal

book if that is of significance.

DEANE J:  Mr Basten, on that point, I follow that the null

and void point has gone as the represented debtors. What about in SA on page 10? Should that be struck

out too?

MR BASTEN: Yes, that should.

DEANE J:  You no longer allege for yourself?

MR BASTEN:  No. So that means SA, lA and lB I think go.

The second point in relation to Templeton v

Leviathan is shortly that the rule in that case is

in different form as appears at page 57 of the

judgment of the Chief Justice in 30 CLR and, as it
appears at the bottom of that page, required

authority of the Court - in other words, an

Carnie(2) 76 3/3/94

order - before it could be binding in

representative form on those not present.

Thirdly, in relation to Payne v Young, my

friend took the Court to a passage in Your Honour

the Chief Justice's judgment which sought to

distinguish Bedford v Ellis in relation to the

joinder point. I read that case as dealing with

the specific circumstance in Payne, namely, that

each plaintiff had a cause of action against each

separate defendant which, of course, was not the

creditor case which was being referred to by

Lord Macnaghten in Bedford. It is therefore

distinguishable from the present case where again

there is one creditor.

It is also important to note that for present

purposes Part 8 rule 2 would permit joinder if only

by leave of the court because there is a general

power to grant joinder even if the old form of the

rule is not strictly complied with.

The fourth point is a small one, but my friend

referred to page 249 and the two compromised

contracts adverted to in that note. The concession

was made because the only purpose for which we

sought to refer to individual contracts was to

establish a common basis of calculation. Whether

or not the compromise, pursuant to section 146 in

proceedings under that section, would have any

effect on section 85 is an individual matter which

might well need to be determined at the end of the

day. There was simply no issue about that at this

stage of the proceedings, so far as the appellants

were concerned. Those were the points that I

sought to make in reply. If the Court pleases.

MASON CJ:  Thank you, Mr Basten. The Court will consider

its decision in this matter.

AT 3.42 PM THE MATTER WAS ADJOURNED SINE DIE

Carnie(2) 77 3/3/94