Carnie & Anor v Esanda Finance Corporation Limited

[1993] HCATrans 212

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl53 of 1992

B e t w e e n -

AINSLEY GEORGE CARNIE and

DIANNE HELEN CARNIE

Applicants

and

ESANDA FINANCE CORPORATION

LIMITED

Respondent

Application for special leave

to appeal

MASON CJ
GAUDRON J

MCHUGH J

Carnie 1 9/8/93

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 9 AUGUST 1993, AT 11.02 AM

Copyright in the High Court of Australia
MR J. BASTEN, OC: If the Court pleases, I appear for the

applicants in this case. (instructed by Consumer

Credit Legal Centre (NSW) Inc)

MR R.C. McDOUGALL, QC:  May it please the Court, I appear

with my learned friend, MR G.C. LINDSAY, for the

respondent. (instructed by Corrs Chambers

Westgarth)

MASON CJ: Yes, Mr Basten.

MR BASTEN:  Your Honours, the issue raised in this case

concerns the scope of the traditional rule relating

to representative actions. As Mr Justice Young

noted, at page 40 to page 41 of the application

book, this has been a worrying point for many years

and one on which judges of various courts have

differed.

In the present proceedings, the views of

Mr Justice Cohen and Mr Justice Young, admittedly

without full argument, and the President in the

Court of Appeal favour the availability of the

procedure; the majority in the Court of Appeal,

being the Chief Justice and Justice Meagher,

differed.

Our point in summary is that whilst the

Chief Justice in the Court of Appeal talks of the

consequences of the 1901 decision of the House of

case going beyond received notions of the scope and

purpose of the rule, at page 60, it is doubtful if

Lords in Bedford v Ellis, or to the flexibility

adopted by modern English judges, including

Mr Justice Vinelott in Prudential Assurance, and

the English Court of Appeal in Irish Shipping.

In order to test whether the circumstances of the present case fall within the boundaries of

received notions - - -

GAUDRON J: When you talk about received notions, what are

you assuming, in any event? Are you assuming that

"same interest" means what was said to· be the case

in Duke of Bedford v Ellis?

MR BASTEN: 

In so far as that has application to the present

circumstances, we accept what Lord Macnaughten and obviously different to some extent, given the

statutory context in which this case arises.

Certainly, we would submit that the received

notions permit that a case may be brought where
there are several and individual claims so long as

Carnie 2 9/8/93

those claims raise a common ingredient which, I

think, is the terminology of Justice Vinelott and

that adopted, in part, in the Court of Appeal.

So, to that extent we would say that the case

falls within the principles of Bedford v Ellis and

that if one applies to Bedford v Ellis's own

fact or circumstances some of the concerns raised

by the Chief Justice, one could make equally valid

criticisms of the decision in that case.

GAUDRON J: Your point, in short, I take it, is that "same

interest" does not mean "common interest" in the

way the Chief Justice used that latter expression.

MR BASTEN:  I think that is so, Your Honours. "Same

interest" does not mean, certainly, a joint

interest or one interest shared by many people.

The Chief Justice, indeed, uses a variety of terms.

At page 59 point 7 His Honour notes, after

referring to "a derivative action" and so on, he

says:

or where (as in Duke of Bedford v Ellis) there

is an assertion of a common claim -

so, that is a slight variation on the terminology

too -

(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.

That terminology may, interestingly, be

compared with the terminology - - -

GAUDRON J: At page 60, His Honour the Chief Justice then

speaks of "the common interest of the present

respondents", rather than "common claim".

MR BASTEN:

Yes, Your Honour is quite correct, at about

line 19, that passage there.

The terminology adopted in Bedford v Ellis,

indeed, varies somewhat between members of the

House of Lords. For example, the phraseology

adopted by Lord Macnaughten, in various passages,

refers to a degree of commonality. For example, at

the bottom of page 7 of the judgment in (1901) AC,

he refers to the necessity:

to consider what is common to the class -

At page 9, in the middle of the page, His Lordship

said:

Carnie 9/8/93

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 -

and without being comprehensive, there is also a

passage in the judgment or the speech of Lord Shand

at page 16 where His Lordship says, in the middle

of the page, after a lengthy quotation:

These statements seem to me to amount clearly to an averment not only of the existence of

preferential rights, and of the same or

substantially the same preferential rights in

all the plaintiffs, but to a charge against

the appellant that he violates these rights -

so, there is a level of difference of phraseology

which suggest that the tight approach which appears

from the Chief Justice's judgment has not always

been followed.

Might I hand up copies of the decision of

Justice Vinelott in Prudential Assurance v Newman

Industries. I will not take trouble with spending

time on this case. It is one involving a claim in

tort, principally for conspiracy, brought by one

shareholder of a company on behalf of many in

relation to statements made individually to each

shareholder of the company in a circular.

The phraseology which His Honour adopts in considering whether or not it is appropriate for

that matter to proceed by way of representative

action, at least to the stage of declaratory

relief, though not to the stage of any order for

damages, none was sought in the representative

element to the proceedings, is summarized, firstly,

at the top of page 252, about line 3, letter A:

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 -

and after further consideration of authority, at

page 255C, he uses the phraseology that the:

condition requires, as I see it, that there must be a common ingredient in the cause of action of each member of the class.

So, that may be a somewhat long-winded way of

dealing with Your Honour's question but to the

extent that there has been some change in

terminology since the Duke of Bedford v Ellis, we

do also rely upon those more modern authorities. I

Carnie 4 9/8/93

might add that the approach adopted by

Justice Vinelott was approved by the English Court of Appeal in the more recent decision of Irish

Shipping.

In order to understand precisely how the

matter came for determination and the result, I
think it is sufficient if I merely note the summary

of the background in the judgment of the

Chief Justice at pages 48 through to 50. The issue

in the case concerned a finance agreement which

appears in the materials at page 98 but to which I

think I need not take Your Honours. There was a

loan of $22,000, a predetermined credit charge, as

His Honour notes, at 48 at line 6 of $12,000,

giving a total amount repayable by the borrowers of

some $34,000. After running into difficulty, the

loan was refinanced and it was refinanced in a way

which, in the terms of the Act, did not fall within

section 70.

MASON CJ:  Mr Basten, at this stage we will call on

Mr McDougall and see what he has to say on behalf

of the respondent.

MR BASTEN: If Your Honours please.

MASON CJ: Yes, Mr McDougall.

MR McDOUGALL:  Your Honours, in pursuance of the invitation

extended by Your Honour the Chief Justice in a

recent issue of the Australian Lawyer, we gave to

the Court last week a brief note of our submissions

on the question. Might I hand up additional copies

rather than ask Your Honours to look through the

file.

MASON CJ:  I do not know what has happened, Mr McDougall,

but we do not have copies of what you gave to the

registry.

MR McDOUGALL: That is as well because, despite the fact

that both Mr Lindsay and I read it and signed it,

it contained a typographical error in the

third-last line, which has now been corrected.

MASON CJ: Well, perhaps it is just as well we did not read

it.

MR McDOUGALL:  Your Honours, this is a case in which a

refusal of special leave will do no injustice to

the applicants; to refuse special leave will not in

any way affect the issues between the applicants

and the respondent or change or foreclose any

argument on those issues. What the applicants are

seeking to do is to agitate, not just on their own

behalf, but on behalf of persons who are outside

Carnie 9/8/93

the proceedings, questions of law in relation to

the construction of the Credit Act and the

practices of the respondent.

The Court of Appeal said, in substance, that

the applicants could not rely upon Part 8

rule 13(1) to argue that question on behalf of

other people. It did not say that they could not

argue those issues themselves nor could it say so.

The case involves no question of principle in

relation to the Credit Act - when I say that, I

mean the case presently before this Court on the

application for special leave. The substantial

case, which at some time in the future will be

heard and determined by the Supreme Court, will

involve those questions. The Court of Appeal

considered the authorities, from other common law

jurisdictions as well as this country, dealing with

the rules relating to representative actions, and

decided that this was not an appropriate case for a

representative action.

MASON CJ: But the Court of Appeal does not seem to have

realized the significance of the judgments of
Mr Justice Vinelott and the Court of Appeal in the

Irish Shipping case. Those judgments seem to give a different complexion to the rule.

MR McDOUGALL:	The judgments give a different complexion to the rule, if they be correct, but the Court of
Appeal, in the decision of the Chief Justice,
considered the relevant authorities, including a decision of the Supreme Court of Canada on the equivalent rule - State rule in that country, and
came to the conclusion, as a matter of principle,
that this was not an appropriate case, and also, in
our submission, indicated, as a matter of
discretion, that it was not an appropriate case,
and they were the considerations which the
Chief Justice, in particular, expressed at
pages 60 to 61 of the appeal book, commencing just
before line 20:  One manifestation of the difficulty

involves in identifying the common

interest -

et cetera, et cetera.

As counsel for the appellant pointed out in

argument, all that the respondents have really

done by way of identifying the class of

persons they seek to represent is to invoke

the words of the statute.

He then says, at line 29:

Carnie 6 9/8/93

with perhaps a few exceptions, the

respondents appear not to know who such

persons might be, or how many of them there

are. 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,

even indirectly, in litigation and the making

of hostile claims against the appellant

arising out of the transactions entered into,

in some cases, several years ago.

And then His Honour refers to the claim, as it

stood before the Court of Appeal, which included a

claim for a declaration that the relevant

agreements, not just between the applicants and the

respondent but between, if I can call them this,

the class of representees and the respondents, were

null and void. And it was pointed out in the

course of argument, as the Chief Justice noted at

page 61 line 10, that some people might not want to

have their variation agreements avoided. And at

that stage the applicants sought to amend their

statement of claim yet again by withdrawing that claimed declaration. And, as His Honour pointed

out:

This event itself provides a telling

illustration of the difficulties the

respondents have in specifying the interest

they have in common with those they seek to

represent.

Now, Your Honours, there is nothing in that,

in our respectful submission, which suggests that

the majority in the Court of Appeal in any way, if

I can put it informally, got it wrong or proceeded

upon the basis of an inappropriate appreciation of

the principles. And the Chief Justice at

pages 54 to 55, having dealt with Duke of Bedford v

Ellis, came to what he called: 

more modern times -

the last two lines on the page. And on page 55

His Honour referred to Prudential Assurance Co Ltd

v Newman Industries, he referred to Irish Shipping

and he referred to Cameron v National Mutual Life

in the Supreme Court of Queensland. He referred to

the importance of the flexibility of the rule,

page 55 line 15. He noted that it appeared, in

effect, to be an attempt to run a class action

under the guise of a representative action - that

appears at page 57 line 6 - and held that this was

not appropriate. He looked at the historical

background of the rule, page 58 line 15, and in

Carnie 9/8/93

doing so, we point out, he referred to the old

English case of Markt & Co Limited v Knight

Steamship Co Limited, a case where there is some

controversy, but it is clear that his reasons did
not depend upon an adoption of the controversial
portion of the judgment in that case - a theme

which the President developed in his dissenting

judgment.

At page 59 in the passage that Your Honour

Justice Gaudron has pointed to, he came to the

question at the heart of this case and held -

pages 59 to 60 - having considered the authorities,

including those that Mr Basten says somehow extend

or amplify the rule, that to say that the

applicants and other borrowers from the respondent

have the same interest as the respondents for the

purpose of Part 8 rule 13:

goes beyond received notions of the scope and

purpose of the rule.

And then, this would appear to be another aspect of the discretionary considerations;

Equally importantly ..... the terms and

conditions upon which class actions of that

character might be permitted and regulated

would require careful consideration, and

definition -

So, in summary as to the reasons of the

Chief Justice, and of course, although

Justice Meagher added some comments of his own, he

expressed concurrence in the reason to the

Chief Justice - that appears at page 87 line 12 -

the majority in the Court of Appeal looked at what

was relevant, held that the rule did not go far

enough and seemed to have held further that what

they were doing, as a matter of discretion, was

something which ought not to be done.

Now that was a decision in which the

Court of Appeal, in our submission, was expressing

a conclusion as to the way in which business in the

Supreme Court of New South Wales ought to be

regulated. It was a procedural decision; it was a

decision on the express wording of the rules of

that court - - -

GAUDRON J:  Was discretion a matter for the Court of Appeal

as such, in that case? I mean, you have referred

to it a number of times, but it really does not

seem to have been run as a discretion argument at

all in the Court of Appeal.

Carnie	9/8/93
MR McDOUGALL:	May I answer that somewhat indirectly,

Your Honour, by saying this, that the power under

the rules is a discretionary power.

GAUDRON J: Yes.

MR McDOUGALL:  To show that the master erred, we need to

find an error of principle. It was conceded on all

sides, as the President recognized and as, with

respect, is obvious from all the judgments, that

there were questions of principle involved. And

that is why the Court of Appeal dealt with the

matter instead of simply sending it back to a judge

at first instance.

GAUDRON J: Yes, but the judgments in the Court of Appeal do

not seem to go to that step of saying that the

master's discretion miscarried, which you would

expect if they were dealing with it on terms of

discretionary grounds and were themselves

exercising a discretion.

MR McDOUGALL: That, with respect, is certainly correct, but

at the same time the Chief Justice in particular

indicated considerations which I have outlined,

which are, in our submission, referable to

questions of a discretionary rather than an

empowering nature. So there do appear to be two

strands in the reasons.

GAUDRON J: That may just suggest that the reasoning is not

entirely clear.

MR McDOUGALL:  It may, with respect, also suggest that it

was all encompassing. But, it does not appear,

from what the Chief Justice said, that he confused

the question of power and the question of

discretion; rather it appears that he relied upon

the discretionary matters, as it were, as a

backstop or an alternative answer to the question.

In some areas the questions overlap; for example,

page 60, the passage I have referred to, at

line 23, where the Chief Justice noted that the

identification of a class did no more than:

invoke the words of the relevant statute.

And, of course, that is a significant point, in our

submission, in favour of the majority's conclusion,

because it indicates that, assuming the

representative claim were allowed to proceed and

assuming there were a determination, the

determination would not, and in terms of the way
the class is formulated could not, immediately

identify those people outside the immediate

parties who took the benefit of the decision.

Other debtors from the respondent, or of the

Carnie 9 9/8/93

respondent - and I use the word "debtors" because

it is the word the Credit Act uses; not for any

pejorative reason - other debtors of the respondent

would need to assert and prove facts to show that

they fell within the class which presently is

sought to be defined simply by a paraphrase of the

relevant words of the Credit Act.

It is not immediately apparent from the way

the class is defined who falls within and who falls
without, nor is it apparent, nor would it be

apparent upon a hearing of the case, who outside

the parties was entitled to benefit. And that is

clearly a matter that the Chief Justice was

entitled to take into account and did take into

account.

Now, Your Honours, in our submission, and we

note this in the outline, this Court would need

compelling circumstances to interfere with the

management by the Court of Appeal of the procedures

and practice of the Supreme Court of New

South Wales.

MASON CJ: Well, generally speaking, that is a very strong

argument, but when one is confronted with a rule of

this kind, having regard to the consequences that

it has and the importance it has for litigation, it

seems to me the argument has diminished force.

MR McDOUGALL:  It certainly has diminished force,

Your Honour, we accept, where the question

of management arises under a rule which is a rule,

however phrased, of widespread application, but

there are two things that we would say to that:
the first is that the decision, as a matter of

principle, is not binding upon courts of other

States; and the second thing is, if other

jurisdictions come to the conclusion that the

Court of Appeal's view is too restrictive or for

some reason is not what is wanted in those States,

it is open to the rule makers - which is usually,

but not always, the courts themselves - so to

indicate by an appropriate amendment to the rules.

And if it is thought that the principle should go

the full course of utilizing the equivalents of

Part 8 rule 13 to permit class actions, then it is

open to the legislature, if it be a matter of
legislative power, as was done with the

Federal Court, to amend the legislation or once again to the rules committees of the various courts

to amend those courts' rules, so to provide.

So, although we acknowledge the force of what

Your Honour the Chief Justice put, it does not, in our submission, provide a conclusive answer to the proposition that the Court of Appeal is the

Carnie 10 9/8/93

appropriate court to manage the business of the

Supreme Court of New South Wales. And,

Your Honours, in the absence of the clearest

possible indication that the majority overlooked or

ignored some relevant statement of the law - and it

is clear that they did not; they referred to the

two decisions on which Mr Basten sought to found his argument - we would submit that no basis for this Court to intervene has been made out.

Now, Your Honours, in our submission, the

arguments advanced by the applicant in the

Court of Appeal ought to lie where they stand; this

case ought to proceed between the applicants and
the respondents to the extent that, on a final

hearing, there is a determination of a question of

principle in relation to the Credit Act. The

benefit of that determination will inure for the

benefit of other debtors who wish to take advantage

of it. If they wish to commence proceedings in the

commercial tribunal of New South Wales, under

Part 9, the unjust contracts portion of the Credit Act, the tribunal will be bound by a determination or a decision in point of the

supreme court and will apply the law, no doubt

faithfully and accurately, if they wish to commence

their own proceedings in the supreme court, to the

extent that they can show that their particular

cases fall within the bounds of the decision in

this case, no doubt they will obtain the benefit of

the decisions of legal principle which arise.

But they are no reasons for saying that people

who do not and might not want to be involved ought

to be dragged in willy-nilly by a representative

action, and I acknowledge in saying that, I am

progressing from the question of principle or

error to a question of discretion, but they are

considerations which are, in our submission,

inextricably intertwined, because if the

discretionary considerations afford a complete	answer, then there is no purpose, with respect, in	this Court granting special leave to entertain the
question of principle.

Your Honours, those are the submissions that

we will put in opposition to the application for

leave.

MASON CJ: Thank you, Mr McDougall. Yes, Mr Basten.

MR BASTEN:  Your Honours, I think in answer to the question

from Justice Gaudron, it is clear that there were

matters of principle involved. In so far as some

of the issues appear to go to matters of

discretion, in my submission they are matters of

policy which were adopted and considered by the

Carnie 11 9/8/93

court in considering the interpretation of the

rule.

The second point I wanted to make was that in

this particular case it is clear that there is a

common element in interpretation of the Credit Act

in regard to all the variation agreements which may

be identified. If this case does not go ahead as a

representative action, there is no guarantee that

it will ever get to a hearing. If it is not, there

will be no resolution for other persons, as

Mr Dougall has suggested. If the respondent is

confident of its course of action, one might expect

it to have welcomed the procedure which would have

produced finality, not only for all affected

borrowers, but also for itself. Those are my

submissions, unless there are other matters

Your Honours seek to - - -

MASON CJ:  The Court will give its decision in this matter

after 2 o'clock.

AT 11.31 AM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 2.15 PM:

GAUDRON J: there will be a grant of special leave in this

matter.

MR BASTEN:  May it please the Court.

MR McDOUGALL: If Your Honour pleases.

AT 2.16 PM THE MATTER WAS ADJOURNED SINE DIE

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