Falfire Pty Ltd v Roger David Stores Pty Ltd

[1996] FCA 853

CATCHWORDS

PRACTICE - pleading - application - representative proceeding - whether leave to be given under s 33K Federal Court Act to amend description of group - discretion in s 33C where fewer than 7 group members discussed

Federal Court Act 1976 ss 33K(I), 33L, 33C(1), 33N(1), 33P
Trade Practices Act 1974 ss 64, 65, 47

Falfire Pty Limited v Roger David Stores Pty Limited, Andrew David Rogers, Richard Neville Rogers and John Sculthorpe Gregg
No QG 201 of 1995
Kiefel J Brisbane  25 September 1996

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION

No QG 201 of 1995

BETWEEN:
  FALFIRE PTY LIMITED

Applicant

AND:
  ROGER DAVID STORES PTY LIMITED

First Respondent

AND:
  ANDREW DAVID ROGERS

Second Respondent

AND:
  RICHARD NEVILLE ROGERS

Third Respondent

AND:
  JOHN SCULTHORPE GREGG

Fourth Respondent

CORAM:Kiefel J

DATE:25 September 1996

PLACE:Brisbane

REASONS FOR JUDGMENT

I have before me two motions.  One is brought by the applicant seeking leave, under s 33K(1) Federal Court Act 1976, to amend the description of the group in these proceedings.  The respondents oppose that course and submit that it ought not, in the exercise of the Court’s discretion, continue as a representative proceeding, as there are now less than seven persons remaining in the group (see s 33L) and they seek orders staying the proceedings or striking out parts of the statement of claim and application.

It is not in dispute that when the application was first filed the members of the group which was described as “persons, firms and corporations who conducted a
Roger David menswear and accessories store business in Australia as franchisees subsequent to 31 December 1992 from the shop locations listed in the Schedule to this Application ¼” numbered 35 or more.  Most have opted out, for one reason or another.  Only three remain:  the two companies Falfire Pty Limited and Dang International Pty Ltd,  and another franchisee, Mr Jean.  It is now sought to add seven individuals who were covenantors and guarantors to the companies’ franchise agreements by adding the following description:

“¼or who are parties to the franchise agreements relating thereto as covenantors and guarantors of the obligations of the respective franchisees ¼”.

There are no additional parties with respect to Mr Jean’s franchise agreement.  In the course of submissions Counsel for the applicant pointed out that the description could be further simplified to refer to the “parties” to the franchise agreements with the first respondent.  In the case of the companies the covenantors were also  the guarantors.  The guarantees are separate agreements.  But in any event the suggestion is more one of form than substance. 

It is not proposed that the group extend beyond the seven named persons and no notice to other covenantors or guarantors under s 33K(4) is proposed, it being assumed that they or their companies, having opted out of the proceedings as franchisees, are not likely to be interested in the proceedings in any other capacity.  It is not necessary to resolve the question whether what is proposed is truly a representative group.  The submissions on the application focused on the different interests of the franchisees on the one hand and the guarantors or covenantors on the other.

The applicant was at pains to stress that the possibility of joining the covenantors to the proceedings was mentioned at an earlier time and when the matter was before the Court in April of this year.  Little seems to me to turn on this, except that it does not persuade me to the contrary of the view that the rationale behind joining them was to ensure that the numbers of the group did not fall below seven.  It was also pointed out that there is, as yet, no defence filed.  But factors such as delay or costs thrown away are not relied upon by the respondents as influential.  As I have said, the question whether there should be leave given focuses principally upon whether the additional persons have a sufficiently similar claim.

As one might expect, the interests of franchisees on the one hand and covenantors and guarantors of the franchisees’ obligations on the other are different. Section 33C(1) Federal Court Act has regard to claims existing against the same person and which arise out of similar or related circumstances having common issues of law or fact in them.  Nevertheless it is necessary to examine the claims made in the amended pleadings and the submissions made with respect to them.

The firstmentioned claim, that relating to the supply of unsolicited goods (see s 64 Trade Practices Act 1974) is said to give rise to a claim for damages by each group member.  The damages are in no way particularised, but the submissions made by the applicant confirmed that what is really in issue is the franchisees’ liability for the amounts now claimed by the first respondent as the price of the goods delivered.  It is in their capacity as guarantors that the seven persons would have an interest in that question, since the covenantors do not assume any relevant obligations under the
franchise agreement. And it seems proceedings have been brought by the first respondent against some of the guarantors in the County Court in Victoria. But it seems to me incorrect to say that the guarantors thereby have a present claim against the respondents or that it is even necessary for them to be joined to the proceedings. If the franchisees are successful in their claim in these proceedings, the guarantors would benefit from any reduction of liability by the application of s 65 Trade Practices Act.  Insofar as that might be converted to a declaration they do not need to be parties to take the benefit and I would not have thought they need to be to be bound by the result. 

The next claim, that with respect to exclusive dealing (s 47 Trade Practices Act) also seems to me to confuse the fact of the guarantors having an interest in the matter with them having a claim which they seek to pursue.  And there is, I consider, no substance in the applicant’s submission that a declaration is necessary to prevent the matter being re-litigated. 

The claim with respect to overcharging by the franchisor concerns stock delivered to the franchisees.  This might conceivably have resulted in a loss to them but, if payment has already been made, it is difficult to see how the guarantors could have any interest (except in the indirect sense of concern for the franchisees’ continued financial well-being) let alone a claim of their own.  It is therefore not made apparent how the claim might refer to stock which has not been paid for.  On the assumption that the claim somehow incorporates the guarantors’ liability for the stock my comments above, in connection with the unsolicited goods claim, also apply here. 
It is not even necessary in my view that they be parties to the proceedings.  There seems therefore to be no proper basis for the grant of leave to amend the description of the group to take account of interests of the covenantors and guarantors. 

There are now only three franchisees constituting the group.  Where there are fewer than seven group members the discretion given by s 33L Federal Court Act, as to whether to continue the proceedings as representative in nature, is wide.  It seems to me that factors such as costs, efficiencies, and whether the relief can be obtained by another mode, matters listed in s 33N(1), will be relevant.  That section applies regardless of the number of persons relevantly interested in the action.  Is the position different when there are only a small number remaining in the group?  I think it would be putting the matter too high to say that, by reference to s 33L, there is a presumption that such a proceeding requires more than seven persons.  Much may depend upon the nature of the claims in the particular proceedings.  But as a general rule s 33L must be taken as indicating that the continuation of the proceedings may not be appropriate to small groups.  And it is not difficult to see why that might be the case, given the nature of representative proceedings, their wider effect and that the procedures set up to accommodate them are necessarily rather more complex than is usually necessary.  It would follow in my view that an applicant in such a case ought be in a position to show why it is necessary or preferable to continue the proceedings in their present form.  In the present case the factors I have just referred to militate against their continuation.  There was, on the other hand, nothing to which the applicant could point as a practical benefit flowing from their continuation.  Even the state of the pleadings would not assist, since they are in such a rudimentary form.

I order the applicant’s application be dismissed with costs.  There will also be an order that the applicant pay the respondents’ costs on its motion.  There will be further consequential orders or directions with respect to the consequential amendments necessary to the application and statement of claim and as to the future conduct of this proceeding with or without the other two former group members (see s 33P).   I will hear further submissions as to these matters.

I certify that this and the preceding five pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.

Associate

Date:25 September 1996

Counsel for the applicant:   Mr T W Quinn
Solicitors for the applicant:                   Lynch & Co

Counsel for the respondents:                Mr R Finklestein QC and Mr P Jopling
Solicitors for the respondents:   Minter Ellison

Date of Hearing:  23 September 1996
Place of Hearing:  Brisbane
Place of Judgment:  Brisbane
Date of Judgment:  25 September 1996