Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd - [2005] NSWCA 83

No judgment structure available for this case.

Reported Decision:
63 NSWLR 203

Court of Appeal

CITATION:
FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD [2005] NSWCA 83

HEARING DATE(S):
5 August 2004, 6 August 2004

JUDGMENT DATE:

31 March 2005

JUDGMENT OF:
Mason P at 1; Sheller JA at 293; Hodgson JA at 294

DECISION:
Appeal allowed.

CATCHWORDS:
CIVIL PROCEDURE - representative proceedings - recovery of tobacco licence fees - abuse of process- champerty - trafficking in litigation - permanent stay of proceedings - expiry of limitation period - application of limitation period to represented parties - same interest - jurisdictional requirement - discretion to "otherwise order" - beneficial common relief - common issues of fact and law - discovery- opt-in procedure - closing the class - relevance to fact in issue - discovery in limine -Supreme Court Rules Pt 8 r13, Pt 23 - restitution - total failure of consideration - relevance of subjective intent of payer. (D)

LEGISLATION CITED:
Business Franchise Licences (Tobacco) Act 1987 (NSW)
Fair Trading Act 1987 (WA)
Federal Court of Australia Act 1976 Pt IVA
Limitation Act 1969
Maintenance and Champerty Abolition Act 1993
Recovery of Imposts Act 1963 (NSW)
Tobacco Products (Licensing) Act 1988 (Qld) s24

CASES CITED:
Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 6
Baltic Shipping Co v Dillon (1993) 176 CLR 344
British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006
Buchanan-Michaelson v Rubinstein [1964] 3 All ER 850
Buiscex Ltd v Panfida Foods Ltd (1998) 28 ACSR 357
Cameron v National Mutual Life Association of Australasia (No 2) [1992] 1 Qd R 133
Carnie v Esanda Finance Corporation (1996) 38 NSWLR 465
Carnie v Esanda Finance Corporation Limited (1995) 182 CLR 398
Cattanach v Melchior (2003) 199 ALR 131
Clairs Keeley (a Firm) v Treacy (2003) 28 WAR 139
Clairs Keeley (No 2) (A Firm) v Treacy
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Duke of Bedford v Ellis [1901] AC 1
Ekaton Corporation Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018
Elfic Ltd v Mack [2003] 2 Qd R 125
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Esanda Finance Corporation Ltd v Carnie (1992) 29 NSWLR 382
Fernance v Nominal Defendant
Few v Guppy (1836) 13 Beav 457; 51 ER 176
Giles v Thompson [1994] 1 AC 142
Ha v State of New South Wales (1997) 189 CLR 465
Hodges v New South Wales (1998) 62 ALJR 190
Hooper v Kirella Pty Ltd (1999) 96 FCR 1
House v The King (1936) 55 CLR 499
Irish Shipping Ltd v Commercial Union Assurance Co Plc [1991] 2 QB 206
J Bollinger v Costa Brava Wine Co Limited (No 2) [1961] 1 WLR 277
Jago v District Court (NSW) (1989) 168 CLR 23
Kain v Farrer (1877) 37 LT 469
Kaukomarrkinet O/Y v "Elbe" Transport-Union Gmbh (The "Kelo")
Keelhall Pty Ltd t/as "Foodtown Dalmeny" and 6 Ors v IGA Distribution Pty Ltd formerly known as Davids Distribution Pty Ltd & 3 Ors, etc [2003] NSWSC 816
Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261
McIntyre v Attorney-General of Ontario (2002) 218 DLR 4th 193
Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151, 13 ANZ Ins Cas 61-612
Milanese v Harburger [1980] VR 652
Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1
Muin v Refugee Review Tribunal & Ors [2002] HCA 30, 190 ALR 601
Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155
Percy v General Motors-Holden's Pty Ltd [1975] 1 NSWLR 289
Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487
Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229
R (Factortame Ltd) v Transport Secretary (No 8] [2003] QB 381
R J Flowers Ltd v Burns [1987] 1 NZLR 260
Re Addstone Pty Ltd (1998) 83 FCR 583
Re William Felton & Co Pty Ltd (1998) 145 FLR 211
Roux v Australian Broadcasting Commission [1992] 2 VR 577
Rover International Limited v Cannon Film Limited [1989] 1 WLR 912
Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 161 ALR 253
Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
Sayers v Merck SmithKline Beecham plc [2003] 3 All ER 631
Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178
Sharpe v Smail (1975) 49 ALJR 130
Shaw v Real Estate Board of Greater Vancouver (1976) 36 DLR (3rd) 250
Shepherd v Australia & New Zealand Banking Group Pty Ltd (1996) 20 ACSR 81 Smits v Roach [2004] NSWCA 233
Stocznia Gdanska SA v Latreefers Inc (No 2) [2000] EWCA 17, [2001] 2 BCLC 116
Taylor v Johnson (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52
Trendtex Trading Corporation v Credit Suisse [1982] AC 679
Williams v Spautz (1992) 174 CLR 509
Wong v Silkfield Pty Ltd (1999) 199 CLR 255
Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70

PARTIES:
FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD;
ARRILLA PTY LTD v ACN 001 259 301 PTY LTD;
BERNEY v AUSTRALIAN LIQUOR MARKETERS PTY LTD;
WHELAN & HAWKING PTY LTD v IGA DISTRIBUTION (VIC) LTD;
MURRAY & ANOR v QUEENSLAND INDEPENDENT WHOLESALERS LTD;
NIENDORF & ANOR v IGA DISTRIBUTION (SA) LTD;
WILLIAMSON & ANOR v COMPOSITE BUYERS LTD;
GOW & ORS v IGA DISTRIBUTION PTY LTD;

FILE NUMBER(S):
CA 41048/03; 41051/03; 41052/03; 41053/03; 41054/03; 41056/03; 41057/03; 41058/03

COUNSEL:
Appellant: S Gageler SC/ M Leeming/ R Dick/ P Carr
Respondents: I M Jackman SC/ S Goodman (ACN 001 259 301 Pty Ltd)
A C Archibald QC/ H K Insall SC (Other Respondents)

SOLICITORS:
Appellant: Robert Richards
Respondents: Freehills (Campbells Cash & Carry, Australian Liquor Marketers, IGA Distribution, Queensland Independent, Composite Buyers)
- Speed & Stacey (ACN 001 259 301 Pty Ltd)

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT JUDICIAL OFFICER:
Einstein J

CA 41048/03
CA 41051/03
CA 41052/03
CA 41053/03
CA 41054/03
CA 41056/03
CA 41057/03
CA 41058/03

MASON P
SHELLER JA
HODGSON JA
Thursday 31 March 2005

FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD

ARRILLA PTY LTD v ACN 001 259 301 PTY LTD

BERNEY v AUSTRALIAN LIQUOR MARKETERS PTY LTD

WHELAN & HAWKING PTY LTD v IGA DISTRIBUTION (VIC) LTD

MURRAY & ANOR v QUEENSLAND INDEPENDENT WHOLSESALERS LTD

NIENDORF & ANOR v IGA DISTRIBUTION (SA) LTD

WILLIAMSON & ANOR v COMPOSITE BUYERS LTD

GOW & ORS v IGA DISTRIBUTION PTY LTD

BACKGROUND

The appellants, licensed tobacco retailers, brought claims against their respective licensed wholesaler, the respondents, to recover licence fees paid by the retailers. These claims were brought in the wake of the High Court’s decisions in Ha v State of New South Wales (1997) 189 CLR 465, which declared as invalid the tobacco licensing schemes of the States and Territories, and Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, which allowed licensed retailers to recover licence fees paid to a licensed wholesaler before the schemes were found to be invalid.

These claims were brought shortly before the expiry of the relevant limitation period. Each claim was funded by Firmstones Pty Ltd and purported to be a representative action on behalf of all retailers who chose to opt-in. The lead plaintiffs sought an order before Einstein J for discovery of the names and addresses of all other members of the class of represented retailers, in order to send an “Opt-In Notice” to each identified party.

Einstein J ordered that the proceedings not continue as representative proceedings and that the plaintiffs’ discovery applications be dismissed. His Honour held that the represented retailers did not have the “same interest” within the meaning of Part 8 r13 Supreme Court Rules and that the proceedings were an abuse of process as regards their purported representative nature.

In the Court of Appeal, the appellants challenged the orders of Einstein J. The defendants asserted two points of distinction between the claims; the first relating to the separate itemisation of licence fees on some but not all invoices and the second relating to the application of Roxborough outside New South Wales or the Australian Capital Territory. The appellants disputed both points as matters of distinction, arguing that rather they indicated common points of law across the whole group, thereby attracting the Rule. Further, the appellants challenged Einstein J’s findings in relation to the role of Firmstone and the solicitor for the plaintiffs.

HELD: Per Mason P (Sheller JA, Hodgson JA agreeing) allowing the appeal:

1. The representative actions are not an abuse of process and the permanent and unconditional stay of proceedings was not justified for abuse of process. Champerty or third party assistance per se do not constitute abuse of process. Neither the solicitor’s retainer nor the role of Firmstone revealed the actuality or tendency of abuse of process. Nor did Firmstone’s activities constitute trafficking in litigation.

2. The proceedings should be allowed to proceed as representative proceedings. The Pt 8 Rule 13 was engaged because there were common issues of law, relating to the application of Roxborough, linking the claims of each represented group of retailers. These were the significance of the Business Franchise Licenses (Tobacco) Act 1987 (NSW) and the relevance of the intent of individual retailers to the cause of action for recovery of money on the basis of failed consideration. Further, there are material common issues of fact sufficient to satisfy the Rule’s jurisdictional requirement. These common issues also indicate the appropriateness of the proceedings continuing as a unity. That the members have the same interest need not necessarily be demonstrated in the originating process. Nor does the Rule require that it be possible to formulate some claim to relief that is beneficial to all members. Merely because individual money judgments will be sought in favour of each member is no bar.

3. The Roxborough cause of action does not depend upon the subjective intent of the retailer who paid the money sought to be recovered. Rather, the cause of action arose when Ha destroyed the common, objectively discernible basis of the relevant transaction. The remote possibility of an admission of subjective intent on the part of a retailer sufficient to defeat his or her individual cause of action does not defeat the likelihood of common issues of law and fact across the class of retailers.

4. The lead plaintiffs would, at an appropriate stage in the proceedings, be entitled to discovery as to the details of all transactions falling within the scope of the representative proceedings. The interests of a fair trial, and the need to the “close the class”, require access to all readily available information relevant to the facts in issue, which are not to be confined to matters touching only those who have already opted-in. These include information tending to identify retailers who will be invited to opt in.

ORDERS:

1. Appeal allowed.

2. Set aside orders 1-6 of the orders made by Einstein J on 7 November 2003 so far as concerns the proceedings that are the subject of this appeal.

3. In lieu thereof, order that:

(i) the proceedings continue as representative proceedings;

(ii) remit proceedings to the Equity Division for further directions in accordance with the reasons of the Court of Appeal.

4. Respondents to pay the appellants’ costs of the motions addressed by Einstein J in the judgments under appeal and the appellants’ costs in the Court of Appeal.

5. Respondents to have a certificate under the Suitors’ Fund Act 1951, if qualified.

CA 41048/03
CA 41051/03
CA 41052/03
CA 41053/03
CA 41054/03
CA 41056/03
CA 41057/03
CA 41058/03

MASON P
SHELLER JA
HODGSON JA
Thursday 31 March 2005

FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD

ARRILLA PTY LTD v ACN 001 259 301 PTY LTD

BERNEY v AUSTRALIAN LIQUOR MARKETERS PTY LTD

WHELAN & HAWKING PTY LTD v IGA DISTRIBUTION (VIC) LTD

MURRAY & ANOR v QUEENSLAND INDEPENDENT WHOLSESALERS LTD

NIENDORF & ANOR v IGA DISTRIBUTION (SA) LTD

WILLIAMSON & ANOR v COMPOSITE BUYERS LTD

GOW & ORS v IGA DISTRIBUTION PTY LTD

JUDGMENT

1 MASON P:

2 The tobacco licensing schemes of the States and Territories were declared invalid by the High Court on 5 August 1997 (Ha v State of New South Wales (1997) 189 CLR 465). The subject matter of Ha was the Business Franchise Licences (Tobacco) Act 1987 (NSW), but the Court’s reasoning was generally accepted as having struck down as duties of excise the similar schemes in the other States and Territories, despite statutory variations some of which are said to be of importance by respondents in the present appeals.

3 It will be necessary later in these reasons to consider differences of detail in some of the statutory schemes. For the present, a broad description of the legislation as it stood in New South Wales in its final form will suffice. Wholesalers and retailers were prohibited under penalty from selling tobacco without a licence. Licences were issued on application for periods of not more than a month, each licensing month expiring on the 27th day of the calendar month. The amount of the fee payable for the licence included a fixed component, plus a sum calculated by reference to 100% of the wholesale list price of tobacco products sold during the "relevant period". This was defined as the month commencing two months before the commencement of the month in which the licence expired. For the purpose of calculating the retailer’s licence fee, the value of tobacco purchased from a licensed wholesaler was to be disregarded if that licensee had paid or was liable to pay a licence fee in respect of that tobacco.

4 In Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, licensed retailers who had bought tobacco in New South Wales from a licensed wholesaler between 1 July 1997 and 5 August 1997 sued to recover the licence fee separately identified in the sales invoices that they had paid before the decision in Ha was announced. The High Court held that these sums were recoverable as money had and received because there had been a failure of a distinct and severable part of the consideration for the purchase of the goods. It was no defence for the wholesaler to establish that the retailers had passed on the cost of the licence fee by charging their customers prices which covered the full amount they had paid to the wholesaler. Liability did not turn on implied contract or mistaken payment.

5 The current proceedings are brought by retailers and are some of several that were brought against licensed wholesalers in the wake of Roxborough. Each of the proceedings is funded by Firmstones Pty Ltd trading as Firmstone & Fell Consultants (Firmstone). The various Summonses were filed in June 2003, shortly before the expiry of the six-year limitation period that applies to private restitutionary actions in this State (Limitation Act 1969, s14(1)(a)).

6 These appeals challenge orders made by Einstein J on 7 November 2003 providing that 17 separate proceedings brought by groups of retailers against their respective wholesalers not continue as representative proceedings. His Honour held that none of the proceedings fell within the Rule permitting representative proceedings (Supreme Court Rules, Pt 8 r13) and also that each proceeding was an abuse of process as regards its purportedly representative character.

7 Eight sets of plaintiffs have continued to prosecute appeals from these orders. Other proceedings have been settled.

8 With two broad qualifications, the issues in each matter are identical, even though different defendants and different States or Territories are involved.

9 The first point of distinction (asserted by the relevant defendants but denied by their plaintiffs) is that the sales invoices provided to some retailers did not separately itemise the licence fees. The sums involved were nevertheless readily ascertainable by reference to published price lists and known methods for determining the value of the applicable licence fees. (One wholesaler’s invoices may not yield to this analysis, but this is a factual dispute to be tried.) The appellants argue that separate itemisation is not an essential aspect of Roxborough.

10 The second point of distinction (also asserted by the relevant defendant but denied by the lead plaintiff suing it, Arrilla Pty Ltd) is ostensibly a dispute about the ambit of Roxborough, although at times it presented as a constitutional argument as to the scope of Ha itself. This defendant has signalled that it wishes to argue that retailers who purchased from a wholesaler outside New South Wales or the Australian Capital Territory are unable to invoke Roxborough.

11 The appellants dispute these asserted points of distinction, while embracing the existence of the two sets of arguments as indicators of points of law that the whole of the relevant groups have in common, thereby attracting the Rule.

12 In each matter the nominated (or lead) plaintiff or plaintiffs seek by Summons:

1. Judgment against the defendant in favour of the plaintiff(s) together with interest pursuant to section 94 of the Supreme Court Act (NSW).

2. Such further or other orders as the Court deems fit.

3. Costs.

13 Each Summons commences its statement of the Nature of the Dispute in substantially identical terms. In Fostif Pty Ltd v Campbells Cash and Carry Pty Ltd the following appears (emphasis added):

1. The plaintiff claims the relief set out in this Summons on behalf of themselves (sic) and the class of unnamed persons referred to in paragraph 2 of the plaintiff’s contentions below whom the plaintiff represents in the proceedings pursuant to the Supreme Court Rules 1970, Part 8, rule 13. By reasons of the “opt-in” procedures referred to below, at the time of judgment there will be no unnamed person in respect of whom judgment is sought. Once a member of the class of represented retailers has signed and returned an “opt-in” notice to the plaintiff’s solicitor that person will become a named plaintiff in the proceedings entitled to judgment in his, her or its favour.

2. The plaintiff proposes to give the unnamed members of the class whom the plaintiff represents an opportunity to decide whether they wish to be involved in the proceedings by the sending of an “opt-in” notice to these persons. The members of the class will be required to sign and return the “opt-in” notice to the solicitors for the plaintiff in order for these persons to become involved as plaintiff in the proceedings. Receipt by the plaintiff’s solicitor of a signed “opt-in” notice will establish that the represented retailer has consented to becoming a plaintiff.

3. The plaintiff and its solicitors know the names and addresses of some but not all the unnamed members of the class whom the plaintiff represents.

In order for the plaintiff to ascertain the names and addresses of the unnamed members of the class so as to send an “opt-in” notice to each person it will be necessary for the defendant, who possesses this information, to discover it in the proceedings.

The plaintiff will seek orders for such discovery from the Court at the earliest opportunity.

14 Then follows a short-form pleading that “the plaintiff” was a tobacco retailer in New South Wales; the defendant was a wholesaler carrying on business in named Australian jurisdictions; there was a tobacco licensing scheme that stipulated licensing requirements in those jurisdictions; the licence fees payable under the New South Wales Act were found to be invalid duties of excise in Ha's Case; each plaintiff purchased tobacco products from the defendant during the period 1 July 1997 to 5 August 1997, paying to the defendant the amount of the licence fees referable to such sales as separately identifiable parts of the amount payable in respect of each sale; and that the defendant did not pay nor become liable to pay the amounts paid by way of licence fees by the plaintiff to the defendant during the relevant period, as licence fees under the “Excise Acts”. The Summons refers to the decision in Roxborough as determining that the plaintiff tobacco retailers were entitled to restitution from the defendant with respect to the licence fees by reason of a total failure of consideration. It pleads a demand for refund of the amounts paid and the defendant's refusal to repay.

15 The expression “plaintiff” is later defined as the lead plaintiff(s) and the represented retailers (Plaintiff’s Contentions par 3).

16 Under the heading Issues Likely to Arise appears the statement:

Whether these proceedings are distinguishable in any material respect from the facts in

Roxborough

.... in which the High Court determined that the plaintiff tobacco retailers in those proceedings were entitled to recover from their wholesale tobacco supplier, amounts paid by way of tobacco licence fees in analogous circumstances to these proceedings.

17 Then follows the Plaintiff’s Contentions in the form of a detailed pleading. It is sufficient to set out par 2:

2. The plaintiffs who are the persons listed in Schedule 1 to this Summons bring these proceedings on behalf of themselves and all other persons (the “represented retailers”) who:

(a) during the whole or some part of the Relevant Period:

(i) were retailers of tobacco products carrying on business in one or more of New South Wales, Queensland, Victoria, South Australia, Western Australia, Australian Capital Territory and Tasmania;

(ii) purchased tobacco products sold to them by the defendant;

(iii) paid to the defendant the amount of the licence fee referable to the sales in (ii) as separately identifiable and severable parts of the consideration payable in respect of each sale;

(b) have not recovered from the defendant an amount or amounts referable to the licence fees paid to the defendant as referred to in (a)(iii) or otherwise released or agreed the release the defendant from any liability or alleged liability to make payments to them of the amount in (a)(iii).

18 Schedule 1 nominates the lead plaintiff or plaintiffs involved and Schedule 2 the Invoice(s) rendered and amounts sought to be recovered by those plaintiffs. The presence of more than one identified lead plaintiff would appear to indicate that they were in partnership or had otherwise dealt jointly with the defendant. Hereafter in these reasons I shall use the singular “plaintiff” to refer to the lead plaintiff(s).

19 The Summons does not name the additional members of the class of retailers who dealt with the defendant. However, the Nature of the Dispute and the Contentions parts clearly state that the plaintiff purports to bring the proceedings on behalf of a wider class of “represented retailers” who are identified by description. The Summons foreshadows that the wider group will be identified by name later in the proceedings, once they have signed an “opt-in” notice. Read fairly and as a whole, the Summons purports to plead the facts material to the right of each represented person to recover the licence fee shown, while obviously contemplating that particulars relevant to individual retailers will be provided in due course. The Summons also signals the intention that each represented person who “opts-in” and whose identity is notified to the defendant will seek an individual money judgment reflecting his, her or its particular circumstances.

20 At this stage none of the defendants has filed its Defence.

21 The plaintiff in each proceeding applied by notice of motion for orders requiring the defendant to disclose by discovery and interrogatories details of “represented retailers” who were sold tobacco products during the relevant period by the defendant.

22 The notices of motion also sought directions permitting the plaintiff to send an “Opt-In Notice” to represented retailers already known to the plaintiff and to those identified through the discovery/interrogatory process.

23 The plaintiff also sought an order pursuant to Pt 8 r13 (the Rule) that the proceedings continue as representative proceedings in respect of all such represented retailers, subject to providing their names and address in an affidavit.

24 The defendants in each proceeding filed their own notices of motion seeking orders:

• alternatively, striking out the Summons in so far as it purports to plead a representative action;

25 The defendants’ motions differed in form, and some sought in the alternative an order that the plaintiff pay security for costs (Red 32-42). Nothing turns on the detail.

26 The plaintiff in each action filed a further motion after Einstein J delivered his first judgment (see below).

27 The motions were heard by Einstein J, who gave his first judgment on 11 September 2003 (Keelhall Pty Ltd t/as “Foodtown Dalmeny” and 6 Ors v IGA Distribution Pty Ltdformerly known as Davids Distribution Pty Ltd & 3 Ors, etc [2003] NSWSC 816). Paragraphs from this judgment are hereafter cited as J1 etc.

28 Einstein J refused the relief sought by the plaintiffs, indicating that he would be dismissing the plaintiffs’ several notices of motion. Orders to that effect were ultimately made on 7 November 2003 (Red 189). His Honour held that the represented retailers did not have the “same interest” within the meaning of the Rule and that the proceedings were an abuse of process as regards their purported representative nature. Einstein J summarized his reasons as follows:

138 A number of disparate and in some cases alternative reasons have been given for the making of orders that the proceedings not continue as representative proceedings. Where the reasons are grounded upon alternative bases, each of those bases supports the making an appropriate order.

139 Insofar as the proceedings seek to invoke the court procedures of discovery to facilitate the litigation the holding has been that the subject litigation funding arrangements proposed by the opt-in procedure are against public policy as well as comprising an abuse of the court process. This justifies the making of an "otherwise order" within Part 8 rule 13 (1).

140 For the reasons given above all of the persons whom plaintiffs propose to represent cannot be said to have the "same interest" in the proceedings. Here again the making of an "otherwise order" within Part 8 rule 13 (1) is appropriate.

141 An altogether disparate but proper ground for the Court’s refusal to permit the proceedings to go forward as representative proceedings is to be found in the Overriding Purpose Rule. I refer here to a recent development in this State, which the Court is also entitled and indeed required to take closely into account. Part 1 of the Supreme Court Rules, as modified by Amendment No 337, elucidates the overall objectives of practices and procedures as specified in the Rules.

142 The overriding purpose of the Rules is to facilitate the " just, quick and cheap resolution of the real issues " in civil proceedings. The overriding purpose clause imposes an obligation on the court to give effect to the overriding purpose when it exercises any of its powers. The opt-in proposal would not be just to the defendants where the proposal is grounded upon the monopoly held by Firmstone which is about utilising that special position by marketing the rights to participate and by insisting upon non negotiable conditions in that regard.

143 The court has a discretion to stay proceedings which constitute an abuse of process. To my mind insofar as these proceedings are sought to be pursued as representative proceedings that discretion should be exercised by staying the proceedings and/or the making now of an “otherwise order” pursuant to Part 8 Rule 13. Whilst in many situations the commencement of representative proceedings plays a crucial role in permitting consumers an opportunity to have their legal rights determined when it can be done efficiently and effectively on their behalf by one person with the same community of interest as other consumers… , this is not an appropriate case in which that community of interest is demonstrated. Further and for the reasons already given, to permit the proceedings to go forward as representative proceedings, far from facilitating the just, quick and cheap resolution of the real issues, would give rise to a procedural morass likely ultimately to be able to be resolved only by a disaggregation of the representative proceedings into separate proceedings.

29 The learned judge made findings referable to the role of the litigation funder Firmstone, the funding arrangements, and the retainer of the solicitor, Mr Richards.

30 Einstein J held that merely because the proceedings were financed by Firmstone in the role of litigation funder did not in itself make them champertous or an abuse of process. Nevertheless, a combination of factors including the size of the funder’s anticipated profit led his Honour to conclude that the proceedings were an abuse. The proposed distribution of “Opt-In” notices would constitute trafficking in litigation that ought not to be permitted to go forward.

31 On 30 July 2003 Mr Richards wrote to the solicitors representing the various defendants notifying them that the lead plaintiffs proposed at an early stage of the proceedings to seek an order for discovery of the names and addresses of all other members of the class of represented retailers. The letter attached a list of the represented retailers of whom the lead plaintiffs were aware as at 24 July 2003 and on whose behalf the particular proceedings had already been brought (Blue 89ff). The names listed constitute “the 2100” clients referred to below.

32 Einstein J held that there should be opportunity for further evidence and submissions in relation to 2100 persons who were not parties but who had already indicated their consent to join the appropriate proceeding (Red 144C-146). At the hearing on 31 October 2003, the lead plaintiffs moved for orders (Red 43ff) whereby the 2100 existing clients would be individually informed of the proceedings and invited to lodge a consent as named plaintiffs, thereby electing to be joined as plaintiffs and not merely participate as consenting represented parties. This procedure was modelled on the decision in Cameron v National Mutual Life Association of Australasia [No 2] [1992] 1 Qd R 133, discussed below.

33 This further application was rejected by Einstein J for reasons delivered on 6 November 2003 (Ekaton Corporation Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018, hereafter referred to as the “second judgment”). His Honour found that there was no power to grant the relief sought. He concluded that the classes of persons proposed to be joined did not have the “same interest” within the meaning of the Rule. He also held that joinder as plaintiffs would be futile because the limitation period had already expired. These further plaintiffs’ motions were dismissed by order 3 of the Orders made on 7 November 2003.

34 Additional difficulties were identified with respect to claims for restitution arising out of transactions outside New South Wales and the Australian Capital Territory.

35 The final Orders included an order that the proceedings not continue as representative proceedings and the dismissal of the plaintiffs’ discovery applications.

36 The limitation period expired either six years after the date of each payment or on 5 August 2003, being six years after the decision in Ha. Einstein J ruled that it was unnecessary to determine the precise cut-off point for limitation purposes (J12). The various proceedings were commenced shortly before the limitation period expired.

37 It was found (J22) that the representative proceedings only came into Mr Firmstone’s mind when the limitation clock had started to run out and when it was clear that various claims then laid before the wholesalers were not going to be settled. Mr Firmstone readily admitted that he had brought about the proceedings for the purpose of stopping the clock for limitation purposes.

38 The Limitation Act 1969 speaks, in conventional terms, of actions that “shall not be brought after the expiration of [x] years from the date on which the cause of action arose”. Cameron, which was a decision of the Full Court of the Supreme Court of Queensland constituted by McPherson SPJ, Ryan and Moynihan JJ, discusses the application of such a provision to unnamed persons on whose behalf representative proceedings are commenced under a rule similar to Pt 13 r8. McPherson SPJ refers (at 135-6) to case law discussing the qualified sense in which those represented are “full parties” to the proceedings. But this, his Honour held, is not the critical issue in the limitation context. In that context the question is whether those represented brought an action. McPherson SPJ held (at 137) that the terms of the Queensland rule concerning representative proceedings (O3 r10 of the Rules of the Supreme Court (Qld)) meant that the action was brought by the named plaintiffs and also the unnamed persons represented by them.

39 Ryan J dealt with the appeal on an alternative basis. The third member of the court, Moynihan J, indicated his concurrence with the two streams of judicial reasoning, stating (at 144) that:

For the reasons given by McPherson SPJ I am however inclined to the view that the action was “brought” on behalf of the unknown but purportedly represented parties from the time of its institution.

40 At an earlier stage in the Cameron litigation it had been held that the action could not proceed as representative proceedings. The claim by the lead plaintiffs to sue “on behalf of and for the benefit of” a broader, defined class was struck out. The Full Court nevertheless held that the proceedings were an irregularity, but not a nullity, as regards their purportedly representative nature. The discussion about the application of limitation statutes to representative actions proceeded from this starting point.

41 Einstein J referred with approval to the reasoning of McPherson SPJ, as he then was, on this point in his first judgment (at J163-166), concluding (at J167) that:

On the assumed basis that the proceedings had been properly commenced within the meaning of Part 8 Rule 13, I would accept as correct the submission by the plaintiffs that based on

Cameron

, the issue of the summons in the representative proceedings would amount to the bringing of the action for money had and received by the named and unnamed plaintiffs for the purposes of both the applicable statute of limitations provisions and SCR, Part 8 rule 13.

42 As indicated, the plaintiffs later invoked Cameron in aid of an application that (proceeding from the finding in the first judgment that the Rule had not been engaged) the Court should nevertheless grant leave under Pt 8 r8(1)(b) to permit the 2,100 to be added as named parties. The judge proceeded in his second judgment on the basis that the purportedly represented persons were never in any sense parties to the proceedings commenced shortly before the expiry of the limitation period. He referred to Pt 8 r11(3)(b), which treats the addition of a party in those circumstances as being effected on the date on which the amendment to that effect was made.

43 In his second judgment (at [35]) Einstein J described as a “misconception” the plaintiffs’ assumption that where representative proceedings are regularly commenced under the Rule by a plaintiff on behalf of numerous persons with the same interest in proceedings, the persons so represented are to be regarded as parties to the proceedings. Citing Pt 8 r13(4) in particular, his Honour held (at [39]) that persons represented by either a plaintiff or a defendant are not parties. He did not, however appear to depart from his earlier endorsement of McPherson SPJ’s reasons in Cameron about time ceasing to run for Limitation Act purposes as regards properly represented persons (cf [14], [15] of second judgment).

44 Like McPherson SPJ, I consider that status as a party is not critical to the application of the Limitation Act to representative proceedings that are properly constituted. In New South Wales it is the Rules of Court which determine when an action is begun for the purposes of the Limitation Act (Fernance v Nominal Defendant (1989) 17 NSWLR 710 at 720 per Gleeson CJ). Where Pt 8 r13 is properly engaged, the proceedings are in terms “commenced… by [the lead plaintiff] as representing [the persons having the same interest in the proceedings]. In other words, the limitation clock stops for the whole group (see also American Pipe & Construction Co v Utah 414 US 538 (1974)). This conclusion about the Limitation Act is consonant with the principle that represented persons are bound by the outcome of issues decided in the representative proceedings (see below). The conclusion does not prevent the defendant from raising as against the lead plaintiff (who was undoubtedly a party) and/or the persons represented any other available defence even if it is not common to all (cf Cameron at 134-5). The conclusion makes it unnecessary to consider the joinder of additional parties that was considered by Einstein J in his second judgment.

45 During the hearing in this Court, Mr Archibald QC (representing Campbells Cash & Carry Pty Ltd, the defendant in the Fostif proceedings) accepted that the Limitation Act is met by both the lead plaintiff and those represented, provided the jurisdictional requirement of the Rule is satisfied at the outset by timely proceedings filed by the lead plaintiff (CA Tr p97). He confined his submissions critical of Cameron to the situation as it presented itself to Einstein J at the time of the second judgment, ie on the assumption that the proceedings had not duly engaged the Rule at the outset. To the uncertain extent that any of the other respondents suggested otherwise I would not accept their submission on this point.

46 Einstein J concluded that the representative proceedings were an abuse of process. His orders and his reasons in the first and second judgments indicate that he regarded as an incurable abuse the participation of any person other than the lead plaintiff. The orders staying the proceedings to the extent that they are representative proceedings meant that the represented persons have lost any chance for overcoming the impact of the Limitation Act on their several claims.

47 The critical conclusions as to abuse of process, public policy and trafficking in litigation are at J60-66 and the summary at J138-143 of the first judgment. The summary is set out above. These reasons indicate that his Honour would have dismissed the proceedings (apart from the claims on behalf of the lead plaintiff personally) even if there were no difficulties with the application of the Rule.

48 The appellants suggest that the matters of greatest weight to the judge were that:

(a) the activities of Firmstone constituted “trafficking in the retailers’ litigation” ;

(b) Firmstone’s rates were inordinately high; and

49 The respondents did not dispute this summary, but correctly point out that a wider category of problems concerned his Honour.

50 Firmstone generally provides advice and assistance in relation to indirect tax matters. Its principal, Mr Firmstone is a chartered accountant.

51 In the representative proceedings Firmstone is responsible for overall project management as well as strategic and technical issues, appointment of legal representatives, funding any legal proceedings and all dealings with tobacco suppliers and government organisations.

52 Firmstone has undertaken financial responsibility for the whole litigation, including the provision of contractual indemnity of the retailers against the risk of any adverse cost orders and the proffering of security for costs.

53 Firmstone has an arrangement with Horwath GST Pty Ltd with respect to the administrative work associated with licence fee recovery litigation. Horwath attends to advertising, communications with clients (including mail-outs), maintenance of appropriate databases and responding to client queries. Firmstone has agreed with Horwath as to a 50/50 split of its 33?% fee based on what is recovered for retailers.

54 Firmstone has retained Robert Richards and Associates (hereafter the solicitor) as solicitors for the project as a whole. The solicitor advises Firmstone and represents retailers introduced by Firmstone who are willing to be lead plaintiffs or represented persons. The solicitor appears on the record for the lead plaintiffs.

55 I infer that the primary judge accepted the evidence of Mr Firmstone when the latter described the funder’s role in the following terms (J16):

Firmstone & Feil, in conjunction with Horwath, will, together with the plaintiff’s solicitor in this matter, Robert Richards & Associates, be performing the tasks set out in (a) to (i) below in connection with the representative proceedings. Certain of the tasks referred to below have already been commenced:

(a) identifying the unnamed retailers represented by the plaintiffs in the representative proceedings. The principal method which the plaintiffs wish to use in order to identify the unnamed represented retailers is through discovery from the defendant as this information is in the possession of the defendant and not the plaintiff or Firmstone and Feil;

(b) subject to the directions of the Court, writing to both those retailers now known to Firmstone and Feil and who are our clients as well as to those unnamed retailers who we succeed in identifying in the future advising them that they are represented plaintiffs in the proceedings and asking them whether they wish to continue to be represented plaintiffs by signing the “Opt-in” notice in the form contained in annexure A;

(c) responding to questions raised by the represented plaintiffs in relation to the proceedings and the “Opt-in” Notice;

(d) receiving “Opt-in” Notices from the represented plaintiffs, checking that the Notices have been correctly completed, and arranging any necessary amendments to the Notices;

(e) collating the properly completed Notices, compiling a list by matter of those represented plaintiffs who have opted to continue to be represented by the plaintiffs in the proceedings and forwarding those lists and the completed “Opt-in” Notices to the Court and to the solicitors for the relevant defendants in each of the proceedings;

(f) communicating progress in relation to the relevant proceedings to the represented plaintiffs as occasion warrants;

(g) assisting in the retrieval and collation of the documentary evidence in the proceedings. In this regard, based on my experience in similar proceedings to recover amounts referable to tobacco licence fees, I consider that the plaintiffs’ case will be largely documentary and that the bulk of the pre-trial preparation will be concerned with collating and presenting the documentary material relating to payment by the plaintiffs of amounts referable to tobacco licence fees paid to the defendants and demonstrating that the circumstances of such payments were analogous or identical to those which existed in Roxborough;

(h) communicating with members of the administrative and legal team assembled by Firmstone and Feil to conduct the proceedings; and

(i) conducting negotiations on behalf of represented tobacco retailers, including in relation to any settlement or other discussions with the defendants (or any of them) which may be necessary.

56 Firmstone had organised and funded proceedings in 2002 brought by 900 smaller retailers and a number of Shell franchisees against British American Tobacco (BATA) and Philip Morris Ltd (PML). These were settled on terms involving at least full recovery of the licence fees. Firmstone received 30% of the settlement in respect of the vast majority of the retailers.

57 In February 2003 further proceedings were commenced in the Commercial List of the Equity Division by Keelhall Pty Ltd & Ors v IGA Distribution Pty Ltd & Ors (formerly known as Davids Distribution). Robert Richards & Associates was acting for the plaintiffs, retained by Firmstone. Defences were filed, but the proceedings were not listed for trial by the time (in the third quarter of 2003) the Limitation Act 1969 would bar any further claims. This was the context in which Firmstone promoted the proceedings now before the Court as a last ditch effort for all of their existing and anticipated clients to be able to recover on what by this stage appeared to be well-established causes of action which had, to date, always culminated in favourable settlements following Roxborough.

58 Firmstone continued to seek out additional retailers as clients. It acquired its clients through word of mouth and advertisements. Each client provided it with an accepted letter of retainer with an attached Letter of Authority. There were minor difference between the retainer for clients obtained before October 2002 (see Blue 5/1004-1012) and those obtained from 1 October 2002 (see Blue 1042ff). The letters clearly set out the respective roles of Firmstone, Horwath and the client.

59 In 2002 approximately 9500 smaller retailers had sued in the Commercial List of the Equity Division to recover licence fees from the two largest wholesalers, BATA and PML. Those proceedings were compromised on the basis that the retailers recovered 105% (excluding interest) of the amount they had paid BATA and 100% of what they had paid PML. The element of compromise lay in the interest component (the purchases had been effected five years previously). In each case, 30% of the amount recovered was paid to Insolvency Management Fund Ltd, a litigation funder.

60 Three matters distinguish the present proceedings from those heard in 2002 and the Keelhall proceedings commenced in February 2003. The first is that additional wholesalers have been sued. The second is that the limitation period expired shortly after the commencement of these proceedings and well before the time when the matter came before Einstein J. The third difference is that the instant proceedings are claimed to be representative proceedings on behalf of classes of retailers some of whose identities are not known to the lead plaintiffs or their funder.

61 Firmstone has agreed to act on each client’s behalf in all dealings with the tobacco wholesalers, doing everything considered necessary or appropriate to try and secure the refund entitlement plus interest, including whatever legal action may be appropriate. Firmstone undertook to meet all costs and not charge the client anything unless and until it was successful. The “success fee” was disclosed as 33?% of any moneys received in respect of tobacco licence fees (including interest thereon). In the event that legal costs were awarded in any court proceedings, Firmstone would retain this amount to contribute to the costs the firm had borne in running the court proceedings. Firmstone has also undertaken to meet any costs awarded by the Court against the participants in the matter.

62 Each prospective client was asked to provide all invoices from all of the tobacco suppliers to its business in relation to the period from 1 July 1997 to 5 August 1997 inclusive; and to sign indicating agreement to Firmstone’s terms. The attached Letter of Authority authorised Firmstone to act in all dealings and to receive all moneys including interest in respect of tobacco licence fees. As from 1 October 2002 the Letter of Authority also authorised Firmstone to enter into a settlement agreement without referral to the retailer provided the amounts offered by the suppliers were not less than 100% of the tobacco licence fees paid to them. From 11 July 2003 this was lowered to 75% of the claim (Blue 1094).

63 As Einstein J pointed out (J64), the control over the litigation given to Firmstone by the clients extended to the right to give instructions as to how the claims were to be moulded, what evidence to rely upon and similar matters.

64 By June 2003 Firmstone had received written authorities from a large number of retailers. This is “the 2100” clients, although the number is less because some retailers paid amounts in the relevant period to more than one wholesaler.

65 There are however many similarly-placed retailers whom Firmstone has been unable to locate but on whose behalf the various proceedings have been purportedly commenced. The identity of these retailers is almost certainly known to the wholesalers, who have obvious reasons for not revealing them to Firmstone. (The respondent to the Arrilla proceedings has suggested that it may have some particular difficulties in locating all relevant records, but this is a matter that can be addressed when it makes a general response to any discovery that is ordered.)

66 Mr Firmstone estimated that the number of potential claimants in the proceedings before Einstein J were in the order of 10,000 with a likely average claim of about $4,000 per person (Black 56, 58).

67 There was evidence, apparently accepted by Einstein J, as to the possible amount of licence fees “retained” by wholesalers. This gives an indication of the size of the business opportunity being pursued by Firmstone in the current litigation, in the context where it is now too late for any other claims to be brought. The opposite side of the same coin is that it indicates the extent of the windfall gain that the wholesalers will keep if they can resist the application of Roxborough by the procedural issues raised by them in the current proceedings. In opening the case before Einstein J the plaintiffs stated that (J8):

The figures obtained by Firmstone pursuant to requests under the

, are revealing. In New South Wales alone, amounts in excess of $90,000,000 would have been expected to have been remitted to the Office of State Revenue in each of July and August 1997. Yet only some $77,000,000 was remitted in July, and $18,000,000 in August 1997. The difference was retained by the wholesalers.

68 Mr Firmstone also deposed (J17):

The Scope of Potential Refunds

12. From my reading of material in the public domain over the last 12 months, I believe that the aggregate of amounts collected by wholesalers of tobacco products and not remitted to the relevant State Revenue Office is in the range of $230 million to $250 million. For example, annexed hereto and marked D and E are two ALP News Statements dated 16 September 2002 and 23 September 2003 respectively in which the National ALP reports that an estimated $250 million is involved. In addition, in Cauvin v Philip Morris Limited [2002] NSWSC736, Windeyer J’s judgment at paragraph 12 records that the plaintiff’s statement of claim alleges a sum comprising of approximately $230 million is involved.

69 Einstein J was highly critical of the role adopted by Firmstone in consequence of the arrangements it had made with its existing clients in the proceedings. The judge accepted that the mere fact that proceedings were financed by third parties with no interest in the outcome other than repayment and profit from the litigation was not itself sufficient to invoke the jurisdiction of the court to stay proceedings as a abuse. He also recognised that very great care must be taken lest the court use its power to deny access to justice (J52). He was nevertheless persuaded that Firmstone’s activities constituted “trafficking in the retailers’ litigation” (J60).

70 The judge found (J20) that Mr Firmstone had not himself taken any steps to contact the named plaintiffs so as to ensure that they were aware of the risk involved in their possible exposure to costs. Nor had steps been taken to ensure that the plaintiffs were aware of the prospect that they may have to give evidence in court. The relevance or weight of these particular findings as to disclosure is unclear. For my part I cannot see the problem. Firmstone has indemnified the client retailers against any costs liability and there is no ground for thinking that its capacity to meet such indemnity was at risk. The judge found that an employee of the firm, Mr Proud, had been advised to tell the plaintiffs what was involved as regards costs (J20). His findings about Mr Firmstone include acceptance that Mr Firmstone will communicate progress to the represented persons as occasion warrants (J16(f), above). These facts fit with the general role being assumed by Firmstone. The proceedings were at an early stage at the time that the defendants moved for summary dismissal.

71 The appellants submit that what Firmstone proposes is no different in substance from what it has done on behalf of the more than 10,000 retailers who have already recovered. The role of the funder and Horwath reflects the nature of the litigation, involving repetitive tasks on behalf of a large number of retailers none of whom is claiming a large sum and each of whom is, on the evidence, content to leave matters in the hands of Firmstone and the solicitor on the terms negotiated. It is further submitted that the trend of modern case law touching the impact of access to justice principles upon traditional attitudes to champerty (itself no longer a crime or a tort in this State) does not sustain his Honour’s pejorative description of Firmstone’s role. It was also submitted that the finding that Firmstone have a “very clear opportunity … to abusively influence the conduct of the proceedings” is unsupported. It also ignores the presence of the solicitor, Mr Richards as the legal fulcrum of representative proceedings that, if allowed to go forward, will be conducted under the control of the Supreme Court. I generally accept these submissions, for reasons detailed below.

72 Einstein J also concluded that Firmstone’s fee was “inordinately high” (J61). He calculated the possible return from the expanded proceedings at between $4-5 million plus reasonable costs, up to 50% higher if full interest is recovered (J61-2). He continued:

63 When one adds to these figures the fees referable to the conjoined proceedings against the other tobacco and petroleum companies, the magnitude of the fees to be charged is, I accept, truly extraordinary. The fact that other funders have received like returns has no relevance when the propriety of their arrangement has not been tested.

…

65 Reference has earlier been made to the returns to Firmstone which is a central structural parameter of the arrangements it proposes. That concern reflects the proposition that

[effectively here Firmstone]

" (cf R (Factortame Ltd) v Transport Secretary (No 8] [2003] QB 381 at 413[85]. Notwithstanding the emphasis given above to the significance of the return to Firmstone, the Court readily accepts that anyone who provided services to tobacco retailers in the environment following the decision in Roxborough

could in the main only expect to be paid out of recoveries in the litigation (cf R (Factortame) at [79]). It may be that there is authority for the proposition that a disproportionately high return to a litigation funder does not of itself constitute unlawful champerty: Buiscex Ltd v Panfida Foods Ltd (1998) 28 ACSR 357. However even if the emphasis given to the significance of the return to Firmstone be misplaced, the circumstance that Firmstone is capitalising upon, and seeks the Court’s assistance to further, the monopoly to sell to the target opt-in group for the stipulated remuneration, the rights that Firmstone has effectively acquired [or the position which it has effectively achieved], colours its proposal as one presently constituting an abuse of process.

73 The matter that appears most to have troubled his Honour is the monopoly advantage enjoyed by Firmstone in light of the limitation bar that fell shortly after commencement of the various proceedings.

74 I shall address the issues touching Firmstone after dealing with a largely independent factual challenge mounted against the judge’s adverse findings about the solicitor.

75 Mr Richards had earlier experience with tobacco licence fee refund claims, having acted for Franklins in claims against BATA and PML that were settled. He told Mr Firmstone that he would be happy to be the project solicitor “on the usual basis” (J17). Mr Firmstone was cross-examined about the steps that had been taken in terms of what Einstein J described as “such sparse contacts as had occurred with those persons who had already been retained by Firmstone” (J19). Specimens of standard form communications between Firmstone and retailers and between Firmstone and the solicitor were annexed to his Honour’s first judgment.

76 The judge’s finding that there were irregularities in the retainer between the solicitor, Firmstone and the clients contributed to the conclusion that the proceedings were an abuse of process. In his summary of “the whole of the complex” from which the abuse of process was discerned (J64) the primary judge cited:

• the evidence as to the lack of communication between the solicitors and the now plaintiffs;

• the tenuous relationship between the plaintiffs and the solicitor on the record, and the nature of the tenuous relationship which the target opt-in group would have with the solicitor. That solicitor has been engaged by Firmstone “as a principal” and not “as agent for [Firmstone’s] clients” and has no costs agreement with those clients. That solicitor is said to have no recourse for fees against those clients [although this does not seem to be documented otherwise than by the statement of engagement “

”];

• the evidence as to the contractual constraint upon any direct communication between the solicitors and the plaintiffs or the target opt-in group which may only take place by means of the conduit already referred to; …

77 The primary findings are at J25 – 35. Einstein J relied particularly on the terms of two letters of retainer as between Firmstone and the solicitor dated 6 April 2001 and 27 November 2002. Copies of the letters were annexed to the judgment (Red 158ff).

78 The earlier letter recorded the solicitor’s agreement to assume responsibility for the carriage of several matters in the Federal Court and the District Court (not including the present matters). The second letter dealt with a retainer by Firmstone “or on behalf of your clients on-going basis” (sic). It noted an agreement that future matters will be undertaken on the same terms as the previous letter, subject to the detailed charging arrangements set out in an attached costs agreement.

79 Included in the conditions are the following:

Whilst you are acting for your client you have engaged me as principal and not as agent for your clients.

Responsibilities

My responsibilities in respect of the matter include (but may not be limited to):

(1) overall supervision of each matter.

(2) attendance to preparation of documents required by courts including affidavits and orders. Filing of those documents:

(3) liaison with counsel;

(4) appearance (except where appearance by counsel) at directions hearings.

Assistance

I understand that you and your staff will provide assistance to me in respect of the matters.

In particular -

• you will be responsible for the day to day carriage of the matters. However you make copies of all documents (in respect of the matters) between yourself and your clients available to me. You will inform me of all material oral communications between yourself and your clients.

• you will liaise with your clients. I will not directly liaise with your clients.

• you will provide sufficient staff to support any court hearings including attendance at court to assist counsel and to liaise with witnesses.

Notification to clients

I understand that you have notified your clients as to my involvement in the matter and they have agreed to me representing them.

80 Einstein J was particularly critical of a statement that “You will liaise with your clients. I will not directly liaise with your clients”. He held:

33 In any event and insofar as the retainer letters concern Robert Richards being retained to act on behalf of the plaintiffs and the target opt-in group, to my mind it is an extraordinary proposition that in this particular situation a firm of solicitors accepts a retainer upon the basis that they will not directly liaise with their clients. Problems which come to mind in relation to such an arrangement would include the following:

• Where a conflict-of-interest may arise as between interests of Firmstone and the interests of the plaintiffs or the target opt-in group it would seem inimical to the interests of the plaintiffs or the target opt-in group for the solicitor acting for both groups of parties to permit Firmstone alone to liaise with the plaintiffs or the target opt-in group. Such a conflict-of-interest may conceivably arise for various reasons including, for example, an occasion when an offer may be made by a group of relevant defendants to settle proceedings on the basis of payment in kind rather than payment in cash. Whilst it is all very well to suggest that Firmstone would not be disadvantaged in that form of settlement and would take its share of the proceeds by way of 331/3% of the value of the payment in kind, all sorts of problems relating to how that value would be ascertained could obviously arise. Likewise when the questions of the actual mode of running the proceedings would arise, it would be in the interests of Firmstone to keep the expenditure on legal fees to a minimum whereas the interests of the plaintiffs and the target opt-in group may very well be to prepare the case comprehensively even though such expenditure on legal fees may be involved. This particular type of issue would likely concern whether each of the individual plaintiffs and the target opt-in group was to give evidence presumably by statement. I reject Mr Gageler’s submission that the interests of Firmstone on the one hand and of the plaintiffs on the target opt-in group on the other hand are “ exactly the same ” or “ coincident ”.

• The well-known obligations of solicitors in relation to communicating to and dealing with their clients to ensure that the discovery processes are understood and complied with may very well be impeded where the solicitors have undertaken not to directly liaise with the clients for or on behalf of whom they act.

34 It is not possible to generalise in relation to circumstances in which solicitors may make arrangements to deal with clients through agents, with integrity and probity and consistently with their professional obligations, including obligations to the Court. The court is here concerned with a very specific set of circumstances which throw up the particular problems already referred, to bearing in mind the significance of a firm of solicitors giving proper consideration to possible conflicts of interest which can sometimes arise where those arrangements are concerned.

81 The appellants submit that his Honour was wrong in the primary and secondary conclusions drawn from the letters of retainer. In particular, the judge erred in construing the letter as an undertaking not to liaise directly with the clients. I agree with the appellants that the letter did not preclude the solicitor from communicating with his clients or those in the classes represented by them. At its highest, it stated an intention that Firmstone would be involved with client liaison. Mr Richards gave evidence that he never intended to abrogate any right of direct communication with his clients (Black 54). His employed solicitor also gave unchallenged evidence to similar effect (Blue 252-9). I see no reason why this evidence should not be accepted.

82 Furthermore, I see nothing wrong in principle in such an arrangement if it has the informed consent of the ultimate client. Thus, an overseas client may instruct a solicitor through an attorney, indicating that day to day liaison is to take place with the attorney. An insured owner of a motor vehicle whose claim for indemnity is accepted by the insurer may place the matter in the hands of that insurer, leaving it to the insurer and the retained solicitor to do whatever is necessary, consistent with the ultimate recognition of the owner’s position as client. The insurance analogy also illustrates the regularity of informed arrangements whereby solicitors represent both insurer and insured as principals, even though conflicts of interest issues may arise and, if they do, will have to be dealt with properly (see generally Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151, 13 ANZ Ins Cas ¶61-612). For many years, barristers declined to have direct contact with their clients: I am unaware that this was ever said to have a tendency to abuse of process.

83 In my view Einstein J drew too long a bow in his condemnation of the retainer arrangement. There is no finding and no basis on the evidence for a finding that this retainer had some particular tendency towards abuse of process. The settlement conflict of interest scenarios hypothesised in J33 are speculative and far-fetched, in my opinion. The fears about discovery are inconsistent with the evidence and rest upon the false footing of the finding about forswearing of the right of direct contact. During submissions, the judge raised with Mr Insall SC a concern that the statement in the letter was a self-denying ordinance that might interfere with the solicitor’s obligation to ensure the client’s compliance with discovery obligations. My reading of Mr Insall’s submission is that he did not embrace this proposition (Black 157). I would reject it on the evidence, particularly in light of s142(2) of the Evidence Act 1995 (the so-called Briginshaw principle).

84 In fact, Mr Richards communicated directly with his clients as the need arose and the correspondence shows both awareness of and attention to professional obligations.

85 When he dealt with retainer issues (at J25ff), Einstein J held that the written evidence as to retainer was to be preferred to Mr Richards’ recollection. His Honour did not however discuss the correspondence revealing that the solicitor had in fact communicated with the lead plaintiffs and that he had been meticulous in ensuring that they understood their obligations with respect to discovery and responding to notices to produce directed at them personally (Blue 8/1823ff). The responsibilities expressly assumed by the solicitor in the Firmstone retainer letter (above) also negate any abdication of a proper role.

86 The evidence reveals the solicitor adopting the normal role as a solicitor on the record in litigation in the Supreme Court. It was not incumbent on Mr Richards to interview retailers personally, at least not at the present stage of the proceedings where Defences have not even been filed. There is no suggestion that he has in any way departed from his responsibility as an officer of the Court. A permanent stay ought not to have been based upon the conclusion that his conduct revealed the actuality or tendency of abuse.

87 Indeed, the involvement of the solicitor should have been placed in the scales against the findings of abuse and tendency to abuse directed at Firmstone (see Elfic Ltd at 145[107], R (Factortame Ltd) v Secretary of State for Transport, Local Government & the Regions (No 8) [2003] QB 381, Clairs Keeley (No 2) (A Firm) v Treacy (hereafter Clairs Keeley (No 2) [2004] WASCA 277 at [75]-[77]).

88 The primary judge held that the funding arrangements including the contemplated opt-in procedure merited the staying of the representative proceedings on several independent though cumulative grounds. The funding arrangements:

• were or were likely to lead to abuse of process;

• were contrary to public policy;

• were unjust to the defendants, independently enlivening a power stemming from the Overriding Purpose Rule (“just, quick and cheap”: Pt 1 r3); and

89 His Honour’s response to these conclusions was the effective dismissal of the claims made on behalf of the represented retailers (both identified and yet to be identified). This occurred independently of the finding that the Rule permitting representative proceedings was not engaged. It is now too late for fresh claims to be filed.

90 The perceived evil of maintenance at common law lay in the very act of officious intermeddling with litigation, rather than in supporting an unfounded claim or defence (Fleming, The Law of Torts 9th ed, LBC, p689). Champerty was maintenance that involved a division of the spoils (or savings) derived from the litigation.

91 Over a decade ago the New South Wales Law Reform Commission observed in its Discussion Paper Barratry, Maintenance and Champerty, DP 36, May 1994 at §2.55:

The considerations of public policy which once found maintenance and champerty so repugnant have changed over the course of time. The social utility of assisted litigation is now recognised and the provision of legal and financial assistance viewed favourably as a means of increasing access to justice.

92 The provenance and scope of the Act are discussed in Smits v Roach [2004] NSWCA 233. The Act abolished both the crime and tort of maintenance (including champerty). It preserved the effect of any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal (s6). This reservation has no direct application to the present case, because no issue has arisen as to the enforceability of Firmstone’s funding contracts.

93 Section 6 means that litigation funding arrangements made without express statutory authority are still subject to scrutiny if the validity of the contractual arrangements is challenged. But, for reasons explained below, it is not correct in this State to conflate the principles of maintenance/champerty with those touching abuse of process, or view them as arming a defendant with a right to stay proceedings because they are maintained (even champertously).

94 Modern courts have, in the words of Lord Roskill, “adopted an infinitely more liberal attitude towards the supporting of litigation by a third party than had previously been the case” (Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 702). This is so even in jurisdictions where the crime and tort have not been abolished.

95 A leading decision is Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261. The Full Court of the Federal Court was considering an application by a defendant to restrain a funder from assisting a franchisee of the plaintiff in litigation alleging contravention of the Trade Practices Act 1974 by misleading and deceptive representations. The Court considered developments in the common law attitude towards champerty, noting (at 267) that:

Concerns expressed earlier this century, as to the potential for the maintenance of actions to give rise to an increase in litigation, might now be considered of lesser importance than the problems which face the ordinary litigant in funding litigation and gaining access to the Courts…. [S]upport of legal proceedings based upon a bona fide common interest, financial or philosophical, must be permitted if the law itself is not to operate as oppressive. The Courts today, in our view, are likely to take an even wider view of what might be acceptable, particularly if procedural safeguards are present or able to be applied.

96 These remarks were in a context where the Court acknowledged that the common law of Australia still recognises the torts of maintenance and champerty. As indicated, this is no longer the situation in New South Wales.

97 Even at common law, a defendant could not by application for injunction or stay obtain in effect interlocutory relief that would stop a plaintiff with a viable cause of action from proceeding. Abuse of process had to be demonstrated, independently of complaint that the plaintiff was receiving the unlawful assistance of a third party. The cases are referred to in Roux v Australian Broadcasting Commission [1992] 2 VR 577 at 608-9. See also Hodges v New South Wales (1998) 62 ALJR 190 at 193 (Brennan J), Magic Menu Systems at 268 and ElficLtd v Mack [2003] 2 Qd R 125 at 137[66].

98 It is unnecessary to consider whether these principles extend to a situation where a defendant could clearly demonstrate that the litigation involved criminal activity. Such litigation would be an abuse of process in some circumstances at least. But this reservation has no bearing on the present situation, for two reasons. Contestable allegations of criminality are not apt for resolution through the interlocutory processes of civil litigation; and the crime has been abolished in this State.

99 In my view, McMurdo P correctly stated the law in Elfic when she said (at 137[67]):

The mere fact that proceedings are financed by third parties with no interest in the outcome other than repayment and profit from the litigation is not itself sufficient to invoke the jurisdiction of the court. Courts should be careful not to use that power to deny access to justice to a party who has sought to fund bona fide proceedings in a way which may be contrary to public policy unless that which has been done amounts to an abuse of the court’s own process….

Magic Menu Systems

Stocznia Gdanska SA v Latreefers Inc

Clairs Keeley (No 2)

100 These changes in attitude to funders have been influenced by concerns about access to justice and heightened awareness of the cost of litigation. Governments have promoted the legislative changes in response to spiralling costs of legal aid. Courts have recognised these trends and the matters driving them. “Ambulance chasing” still has negative connotations in many quarters, but it is now widely recognised that there are some types of claim that will simply never get off the ground unless traditional attitudes are modified. These include cases involving complex scientific and legal issues. The largely factual account in the book and film A Civil Action has demonstrated the social utility of funded proceedings, the financial risks assumed by funders, and the potential conflicts of interest as between group members in mass tort claims propounding difficult actions against deep-pocketed and determined defendants.

101 In the report, Access to Justice Lord Woolf wrote (Ch 17 §2):

It is now generally recognised, by judges, practitioners and consumer representatives, that there is a need for a new approach both in relation to court procedures and legal aid. The new procedures should achieve the following objectives: (a) provide access to justice where large numbers of people have been affected by another’s conduct, but individual loss is so small that it makes an individual action economically unviable;(b) provide expeditious, effective and proportionate methods of resolving cases, where individual damages are large enough to justify individual action but where the number of claimants and the nature of the issues involved mean that the cases cannot be managed satisfactorily in accordance with normal procedure; (c) achieve a balance between the normal rights of claimants and defendants, to pursue and defend cases individually, and the interests of a group of parties to litigate the action as a whole in an effective manner.

Sayers v Merck SmithKline Beecham plc

102 The respondents sought to draw support from Clairs Keeley (a Firm) v Treacy (2003) 28 WAR 139 (hereafter referred to as Clairs Keeley (No 1)). This prompted the appellants to submit that that decision ran against the tide of appellate authority in Australia, England and Canada (as to England, see eg Hamilton v Al Fayed (No 2) [2003] QB 1175; as to Canada, see eg McIntyre v Attorney-General of Ontario (2002) 218 DLR 4th 193).

103 There are significant points of distinction that make it unproductive to examine Clairs Keeley (No 1) in detail. In Western Australia the common law of maintenance and champerty continues. The claims of the funded plaintiffs were based on alleged breaches of fiduciary duty, negligence and the Fair Trading Act 1987 (WA), ie they were incapable of assignment. It was held that there was a “de facto assignment” of the cause of action (at [134]) and an improper bargain by the solicitors for a share in the litigation (at [181]). There was non-disclosure of an important aspect of the arrangements as between the funder and the solicitor ([158]-[168]). The solicitor’s role was found in these circumstances to entail a position of conflict and breach of fiduciary duty ([169]-[171]). Despite all of this, the stay was conditional (See at [707] and also Clairs Keeley (No 2)).

104 A champertous arrangement may have a particular tendency to lead to abuse of process, whether or not champerty remains tortious. But it is that tendency, and not its champertous nature as such, that must be considered in an application for a stay. To the extent that Einstein J focussed upon Firmstone’s champertous intermeddling as such and the common law policies proscriptive of the tort of champerty (eg J43-44, 56, 66) his Honour erred, in my respectful view, despite his acknowledgement that champerty by itself did not amount to abuse of process (J52).

105 His Honour adverted to contravention of public policy as an independent basis for the stay (see at J139). However, the reasons indicate that he had in mind the champertous nature of the funding arrangements and the reservation of public policy in matters contractual by s6 of the Maintenance and Champerty Abolition Act 1993. In my view, it is dangerous to move beyond the scope of the reservation in s6 without very clearly identifying some alternative ground for invoking public policy (see Smits at [69]). “Public policy” in the sense of the policy of the law (cf Cattanach v Melchior (2003) 199 ALR 131 at [60]-[75]) has changed and become more narrowly focussed in this area. It has nothing to do with the “private notions of judges as to what is good or expedient policy” (Giles v Thompson [1993] 3 All ER 321 at 335, Clairs Keeley (No 1) at 154[73]). The law now looks favourably on funding arrangements that offer access to justice so long as any tendency to abuse of process is controlled (see eg Re William Felton & Co Pty Ltd (1998) 145 FLR 211 at 220, Gore v Justice Corporation (2002) 119 FCR 429 at 450[59], Stocznia Gdanska at [59]). As I explain below, the present litigation attracts the following principle recently stated by Lord Phillips MR giving the judgment of the English Court of Appeal in Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA 92:

Public policy now recognises that it is desirable, in order to facilitate access to justice, that third parties should provide assistance designed to ensure that those who are involved in litigation have the benefit of legal representation.

259 My conclusions about the impact of the Limitation Act upon represented persons suggest that it may be appropriate to delete the words “and to being named as a plaintiff in the representative proceedings” for the proposed Opt-In Notice (cf J74-76).

260 The matter here in issue is whether the court (a) can and (b) should lend its processes to assist the plaintiffs identify additional members of their respective groups as a prelude to inviting those persons to opt-in.

261 The lead plaintiffs invoked Pt 23 r3 (Order for discovery) and Pt 24 r5 (Order to answer interrogatories) in aid of orders requiring the defendants to disclose their records of transactions affecting “represented retailers” as defined in the respective summonses (see Red 25-31). This information would be amenable to the processes of discovery and interrogatories in due course. However, the plaintiffs sought it at the present stage of the proceedings in aid of the prosecution of the proceedings as representative proceedings. Each plaintiff also sought directions that, within 28 days of compliance by the defendant, the plaintiff send to represented retailers then known to the plaintiff the “Opt-In Notice” and letter annexed to an affidavit of Mr Firmstone sworn 8 August 2003. (These documents are at Blue 79ff.)

262 The standard letter proposed to be sent by Firmstone to identified retailers (Blue 79ff) informs them that proceedings have already been commenced on their behalf, identifying the proceedings by number and defendant(s). The letter continues:

However, the proceedings are now at the stage where you and other represented tobacco retailers will have to elect whether you consent to the representative action being continued on your behalf. The terms on which we are prepared to act on your behalf in connection with the proceedings are in this letter. If you so elect, you will participate in any favourable outcome from this action, including any negotiated settlement.

If you wish to participate, you will need to sign the attached Opt-In Notice and give us your authorisation to act on your behalf….

What you will need to do to join us .

1. Please complete the attached Opt-In Notice to confirm that you:

(i) consent to the relevant representative proceedings in the NSW Supreme Court being continued on your behalf and being named as a plaintiff;

(ii) authorise Firmstone and Feil to act on your behalf; and

(iii) accept the fee arrangement contained in this letter.

….

263 The letter does not preclude the retailer from making of a counter-offer, nor is Firmstone locked into dealing with each and every retailer on identical terms. (There may of course be obligations of fair and evenhanded dealing on the part of the lead plaintiffs: see generally Arakella.) Furthermore, as Mr Gageler conceded in argument (CA Tr p127), the court is free to exercise its authority under the Rule by requiring Firmstone to modify the terms under which it offers the opportunity to opt-in to individual retailers or retailers generally.

264 Einstein J declined to make the orders for discovery/interrogatories because he had concluded that the representative proceedings had the fundamental flaws discussed above. His Honour nevertheless indicated that there was no objection in principle to such relief, even for the purpose of ascertaining the members of the class (J152-3). He pointed out that discovery for the purpose of identifying parties is a remedy known to the law (see generally Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at 9[24]-[26]).

265 The respondents contend that discovery/interrogatories are not available for this purpose, essentially because these processes would not be directed at facts in issue. Alternatively, they submit that the court should decline such assistance, essentially because it is really sought to maximise Firmstone’s profits.

266 Except for the Metcash parties, the respondents have not suggested that the compilation of the information would be oppressive in the relevant sense. They have no privilege to withhold this information even though the yielding up of it is likely to reveal thousands of retailers who will be happy to sign up to Firmstone’s terms and formally opt-in.

267 No authority was cited that directly addresses these issues.

268 Discovery is regulated by Pt 23 of the Rules. The scope of the traditional remedy is significantly narrowed, but the touchstone remains that of documents “relevant to a fact in issue” (r2). Rule 1(d) provides that a document or matter is taken to be relevant to a fact in issue if it could, or contains material which could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or matter would be admissible in evidence. The ultimate concern is the interest of a fair trial (Percy v General Motors-Holden’s Pty Ltd [1975] 1 NSWLR 289 at 292).

269 According to Bailey and Evans, Discovery and Interrogatories in Australia (at [13,075]), a party suing or being sued in a representative capacity must discover all relevant documents in the possession, custody or power of the party and of those whom the party represents. The authors cite Few v Guppy (1836) 13 Beav 457-472; 51 ER 176 (trustees suing on behalf of the beneficiary); Kain v Farrer (1877) 37 LT 469 at 470 (defendant sued as representative of The Board of Trade); Buchanan-Michaelson v Rubinstein [1964] 3 All ER 850 (defendant sued as executor of estate); Sharpe v Smail (1975) 49 ALJR 130 at 132; and Milanese v Harburger [1980] VR 652 (Public Trustee suing on behalf of protected person)). These authorities support the proposition that discovery may be ordered against a lead plaintiff requiring production of documents in the possession, custody or power of the represented persons. Any other conclusion would permit representative proceedings to be an instrument of injustice.

270 The converse must hold true. If representative proceedings are properly commenced, then the defendant can be obliged to discover documents relevant to issues, a fortiori common issues, as between the plaintiff and represented persons on the one hand and the defendant on the other. It would follow that, at an appropriate stage in the proceedings, the lead plaintiffs would be entitled to discovery as to the details of all transactions falling within the scope of the representative proceedings, to the extent that those details touch on matters in dispute.

271 The fair trial of the issues in representative proceedings requires access to all information readily available touching all of the issues encompassed in the proceedings.

272 Defences have yet to be filed in the present cases, but that appears to be the defendants’ choice. The defendants have nevertheless already flagged many of the matters in issue as between themselves and their retailer customers. Some of the issues are referred to earlier in these reasons. The defendants contend that each retailer’s transaction is potentially unique. Access to the accounting records would also assist in computing the quantum of recovery on behalf of individual retailers, should the plaintiffs prove successful in the proceedings. These considerations indicate that the defendants would be bound to disclose at least the information presently sought by the lead plaintiffs if the proceedings continue as representative proceedings. The information is relevant to the facts in issue (cf Pt 23 r1(d).

273 If the discovery dispute is viewed in this way, its problem is at most one of prematurity. Yet there is no hard and fast rule about the time of discovery (see Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178). The interests of justice favour early limited discovery of these matters, because it assists the court in “closing the class” as a step in case-management and it is the fairest and most effective way of giving notice to all represented persons. These matters are explained more fully below. The respondents are best equipped to aid the court in this process (cf Carney at 422).

274 The respondents’ contention that the facts in issue are to be confined to matters touching only those who opt-in is circular and misconceives the proper function of the opting-in procedure (see below). This objection to discovery is a variant of Mr Hutley SC’s argument previously addressed.

275 An alternative that avoids grappling with the “relevant to facts in issue” question would be for a subpoena to issue to the defendants requiring production of their records in aid of the court’s exercise of interlocutory jurisdiction under the Rule. I see no reason why this could not occur. This would arm the court with information as to how best to locate and identify the entire class of opting-in retailers before effectively closing the class. It is difficult to see why the presently contentious matter has not been addressed in this manner.

276 I need to explain my reference to “closing the class”.

277 My conclusion that these representative proceedings were duly instituted on behalf of the represented persons identified in each Summons has the corollary that, unless the court otherwise orders pursuant to Pt 8 r13(1), issues decided in the representative proceedings will bind the lead plaintiffs, all represented persons and of course, the defendants.

278 Many procedural issues can arise in representative proceedings. Unlike Part IVA of the Federal Court of Australia Act 1976, the Rule addresses few of them in terms. (This may be something worthy of the attention of the Supreme Court Rules Committee.)

279 The judicial management of representative proceedings and the power to ensure that they are conducted fairly and in pursuit of the goals of the Overriding Purpose Rule (Pt 1 r3) are located in the power to “otherwise order” (Pt 8 r13(1)). This is the fulcrum by which the Court exercises the discretion to ensure that proceedings only continue as representative proceedings if and to the extent that it is in the interests of justice for this to occur.

280 It has been suggested that:

One of the most controversial issues in the design of a class action procedure is whether to implement an ‘opt out’ model or an ‘opt in’ model. Pursuant to an opt out model a class suit can be commenced without the express consent of the ‘absent’ class members. However, an opportunity is offered to the class members to exclude themselves from the class action; that is, to opt out. Under an opt in model only those who take positive action, by giving their express consent to the commencement of the class suit, will be covered by the judgment on the common questions.

281 References to opting-in and opting-out should not mislead the reader into thinking that those who opt-in only become formally involved in the proceedings from the time when they opt-in. In truth, those represented are represented from the outset so long as the Rule’s “jurisdictional” requirement is met. The court and the lead plaintiff are obliged to have regard to the interests of all represented persons from the outset and for as long as they continue within the class as described by the lead plaintiff in the originating process. The “opt-in” and “opt-out” procedures supervised and sanctioned by the court recognise the represented persons’ interest in the proceedings, stemming as it does from the potential impact of the doctrine of res judicata.

282 Representative proceedings are usually commenced without notice to or the prior consent of the represented persons. Indeed, defendants may have an interest in keeping things that way, because matters decided on the merits will bind the whole class, leaving dissatisfied individuals to move the court to be relieved against enforcement of judgment pursuant to subrules (4)-(6) of the Rule. Although the present respondents do not appear anxious to embrace the benefits of res judicata as against all retailers, I do not interpret this as any concession about the weakness of their cause. One entirely understands such an attitude in a context where the Limitation Act has removed the threat of fresh proceedings. Perhaps this is another reason why the “monopoly” label is ultimately tendentious.

283 In Shepherd, Bryson J indicated (at 99-101) that the court leans in favour of the opt-in procedure. He said (at 101):

I would think there would be few occasions when what was referred to as an “opt out” notice would be appropriate. Either the circumstances show that a person’s actual decision is impossible to obtain or it is so obvious what it would be that it need not be obtained, or that a person’s actual decision should be obtained.

284 The lead plaintiffs and the funder involved in the current proceedings have recognised that opting-in is appropriate in the present matter. I agree, particularly since the relief ultimately sought on behalf of the retailers is monetary.

285 The respondents seek to go further. They submit that the opt-in procedure is driven by Firmstone’s desire to ensure that only those retailers who accept Firmstone’s terms should have the right to participate in the anticipated fruits of victory. Interestingly enough, the respondents do not propose opting-out as the antidote. My general remarks about the utility of these funded proceedings in assisting access to justice explain why I reject this submission about the improper goal of the proceedings or the discovery motions.

286 The obvious intent behind opt-in procedures is that a time will be reached when it will be too late for further persons to opt-in. At that stage, the court will order that the class of represented persons will be limited henceforth to those who have already opted-in. This will be an exercise of the power to “otherwise order”, thereby ensuring that the proceedings continue thereafter only by those who have already been identified individually by having opted in. Naturally this decision could be revisited if circumstances required it.

287 In the United States, constitutional due process requirements have led to the formulation of Rule 23(c)(2) of the Federal Rules of Civil Procedures, which provides that if a court permits a class action to be maintained under the relevant subdivision it must direct to the members of the class “the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort”. From this premise, there is a body of caselaw about what is effective notice (see generally Wright and Miller, Federal Practice and Procedure §178). According to that treatise (ibid):

… if there is an existing document or readily accessible source that names [class members], then the identity of class members can be ascertained with a reasonable effort and plaintiff may be required to send a notice to each person.

Other situations may not be solved as easily, however. Thus, in one action involving a potential class of 3,750,000 members, the court ruled that an evidentiary hearing was necessary to determine what constitutes a reasonable effort to identify the individual class members. A more typical procedure is for the court to require the representative plaintiffs to submit a proposed list of persons to whom notice should be sent and then allow defendant to object or submit a counterproposal. If the members of the class can be identified more readily by defendant, then he may be obliged to compile the list, (fn 30) although the costs of that compilation may be borne by the plaintiffs.

Battle v Municipal Housing Authority for the City of Yonkers

Contract Buyers League v F & F Investment

288 This United States practice and the reasons behind it support my conclusion that discovery and/or interrogatories should be ordered along the lines as sought. The details can be addressed by the Equity Division.

289 The Metcash respondents have filed affidavits suggesting likely difficulties in fully complying with the motions for discovery and interrogatories (Blue 16-30, Orange 100). These matters were not explored in detail at the hearing and Einstein J did not have to address them (see J154). I am unpersuaded that the exercise is so oppressive that discovery should be refused outright with respect to such obviously pertinent information some of which is undoubtedly reasonably accessible. These respondents are free to propose alternative methods that would meet the demands of justice if, as assumed, they continue to support the opt-in alternative. Individual defendants will also have the right to apply under Pt 23 r4 and Pt 24 r3 for particular relief from the orders proposed to be made.

290 The Metcash Respondents also submit that the discovery orders as sought would be futile because of the way the application is drawn. It seeks discovery of the names and addresses of “represented retailers”, this expression being defined as those persons who “paid to the defendant the amount of licence fee referable to sales as separately identifiable and serviceable parts of the consideration payable in respect of each sale”. These respondents maintain that none of their customers fall into this category because their published price lists and most of their invoices made no reference to licence fees. In my view, this is a matter to be explored in the litigation. I would not refuse discovery in limine on the present information.

291 Leave to appeal was granted during the hearing.

292 I propose the following orders in each matter:

1. Appeal allowed.

2. Set aside orders 1-6 of the orders made by Einstein J on 7 November 2003 so far as concerns the proceedings that are the subject of this appeal.

(i) the proceedings continue as representative proceedings;

(ii) remit proceedings to the Equity Division for further directions in accordance with the reasons of the Court of Appeal.

4. Respondents to pay appellants’ costs of the motions addressed by Einstein J in the judgments under appeal and the appellants’ costs in the Court of Appeal.

293 SHELLER JA: I have had the privilege of reading in draft the President’s judgment with which I entirely agree.

294 HODGSON JA: I agree with the orders proposed by Mason P, and subject to what I say below, with his reasons.

295 The class represented by the plaintiffs in each proceeding is identified as:

2 The plaintiffs who are the persons listed in Schedule 1 to this Summons bring these proceedings on behalf of themselves and all other persons (the “represented retailers”) who:

(a) during the whole or some part of the Relevant Period:

(i) were retailers of tobacco products carrying on business in one or more of New South Wales, Queensland, Victoria, South Australia, Western Australia, Australian Capital Territory and Tasmania;

(ii) purchased tobacco products sold to them by the defendant;

(iii) paid to the defendant the amount of the licence fee referable to the sales in (ii) as separately identifiable and severable parts of the consideration payable in respect of each sale;

(b) have not recovered from the defendant an amount or amounts referable to the licence fees paid to the defendant as referred to in (a)(iii) or otherwise released or agreed the release the defendant from any liability or alleged liability to make payments to them of the amount in (a)(iii).

296 Under the intended opt-in procedure, what is proposed is that ultimately an order will be made under Pt 8 rule 13(1) that the proceedings be continued by the plaintiffs representing those of the identified class who have opted in (that is, in terms of the Rule, representing all the class excepting those who have not opted in). However, the presently proposed notification of the opportunity to opt-in makes it a condition of opting in that one third of any claim be given up to Firmstone, and that authority to settle the claim also be given to Firmstone.

297 In my opinion, this does not, as submitted by Mr Hutley SC, mean that these are not proceedings commenced by the plaintiff as representing persons identified as “numerous persons with the same interests”, so as to permit the commencement of proceedings in accordance with Pt 8 rule 13; or that these proceedings are abuses of process. If the Court were to consider that the opt-in procedure sought to be used would be contrary to the claim to represent the whole class of numerous persons with the same interest, or otherwise oppressive or extortionate, the Court could require changes to the opt-in procedure.

298 The orders proposed by Mason P leave the details of the opt-in procedure to the Equity Division. In my opinion, it would be open to the judge dealing with the matter to consider whether the opt-in notification should give the persons notified the alternative of opting in without giving up one third of their claim, but instead (for example) having to conduct for themselves whatever process is necessary to obtain a specific order in their favour, after matters common to all represented persons have been determined (and presumably, being at some risk as to costs in that process). The precise terms of any authority to settle could also be the subject of consideration.

299 Since the proceedings as presently constituted are on behalf of the whole of the identified class of persons, the identification of persons in the class is at present an issue in the case so as to be a proper subject of discovery, subject to discretionary considerations; and in my opinion this will remain the case until an order is made, pursuant to the opt-in procedure, limiting the persons represented to those who have opted in.

**********

Citations

Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83

Most Recent Citation

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Mobil Oil Australia Pty Limited v Trendlen Pty Limited [2006] HCA 42

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Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151

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CITATION:	FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD [2005] NSWCA 83
HEARING DATE(S):	5 August 2004, 6 August 2004
JUDGMENT DATE:	31 March 2005
JUDGMENT OF:	Mason P at 1; Sheller JA at 293; Hodgson JA at 294
DECISION:	Appeal allowed.

CATCHWORDS:	CIVIL PROCEDURE - representative proceedings - recovery of tobacco licence fees - abuse of process- champerty - trafficking in litigation - permanent stay of proceedings - expiry of limitation period - application of limitation period to represented parties - same interest - jurisdictional requirement - discretion to "otherwise order" - beneficial common relief - common issues of fact and law - discovery- opt-in procedure - closing the class - relevance to fact in issue - discovery in limine -Supreme Court Rules Pt 8 r13, Pt 23 - restitution - total failure of consideration - relevance of subjective intent of payer. (D)
LEGISLATION CITED:	Business Franchise Licences (Tobacco) Act 1987 (NSW) Fair Trading Act 1987 (WA) Federal Court of Australia Act 1976 Pt IVA Limitation Act 1969 Maintenance and Champerty Abolition Act 1993 Recovery of Imposts Act 1963 (NSW) Tobacco Products (Licensing) Act 1988 (Qld) s24
CASES CITED:	Australian Coastal Shipping Commission v Curtis Cruising Pty Ltd (1989) 17 NSWLR 6 Baltic Shipping Co v Dillon (1993) 176 CLR 344 British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006 Buchanan-Michaelson v Rubinstein [1964] 3 All ER 850 Buiscex Ltd v Panfida Foods Ltd (1998) 28 ACSR 357 Cameron v National Mutual Life Association of Australasia (No 2) [1992] 1 Qd R 133 Carnie v Esanda Finance Corporation (1996) 38 NSWLR 465 Carnie v Esanda Finance Corporation Limited (1995) 182 CLR 398 Cattanach v Melchior (2003) 199 ALR 131 Clairs Keeley (a Firm) v Treacy (2003) 28 WAR 139 Clairs Keeley (No 2) (A Firm) v Treacy David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Duke of Bedford v Ellis [1901] AC 1 Ekaton Corporation Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018 Elfic Ltd v Mack [2003] 2 Qd R 125 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Esanda Finance Corporation Ltd v Carnie (1992) 29 NSWLR 382 Fernance v Nominal Defendant Few v Guppy (1836) 13 Beav 457; 51 ER 176 Giles v Thompson [1994] 1 AC 142 Ha v State of New South Wales (1997) 189 CLR 465 Hodges v New South Wales (1998) 62 ALJR 190 Hooper v Kirella Pty Ltd (1999) 96 FCR 1 House v The King (1936) 55 CLR 499 Irish Shipping Ltd v Commercial Union Assurance Co Plc [1991] 2 QB 206 J Bollinger v Costa Brava Wine Co Limited (No 2) [1961] 1 WLR 277 Jago v District Court (NSW) (1989) 168 CLR 23 Kain v Farrer (1877) 37 LT 469 Kaukomarrkinet O/Y v "Elbe" Transport-Union Gmbh (The "Kelo") Keelhall Pty Ltd t/as "Foodtown Dalmeny" and 6 Ors v IGA Distribution Pty Ltd formerly known as Davids Distribution Pty Ltd & 3 Ors, etc [2003] NSWSC 816 Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261 McIntyre v Attorney-General of Ontario (2002) 218 DLR 4th 193 Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151, 13 ANZ Ins Cas 61-612 Milanese v Harburger [1980] VR 652 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 Muin v Refugee Review Tribunal & Ors [2002] HCA 30, 190 ALR 601 Mutual Pools & Staff Pty Ltd v Commonwealth (1994) 179 CLR 155 Percy v General Motors-Holden's Pty Ltd [1975] 1 NSWLR 289 Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229 R (Factortame Ltd) v Transport Secretary (No 8] [2003] QB 381 R J Flowers Ltd v Burns [1987] 1 NZLR 260 Re Addstone Pty Ltd (1998) 83 FCR 583 Re William Felton & Co Pty Ltd (1998) 145 FLR 211 Roux v Australian Broadcasting Commission [1992] 2 VR 577 Rover International Limited v Cannon Film Limited [1989] 1 WLR 912 Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 161 ALR 253 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 Sayers v Merck SmithKline Beecham plc [2003] 3 All ER 631 Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178 Sharpe v Smail (1975) 49 ALJR 130 Shaw v Real Estate Board of Greater Vancouver (1976) 36 DLR (3rd) 250 Shepherd v Australia & New Zealand Banking Group Pty Ltd (1996) 20 ACSR 81 Smits v Roach [2004] NSWCA 233 Stocznia Gdanska SA v Latreefers Inc (No 2) [2000] EWCA 17, [2001] 2 BCLC 116 Taylor v Johnson (1983) 151 CLR 422 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Williams v Spautz (1992) 174 CLR 509 Wong v Silkfield Pty Ltd (1999) 199 CLR 255 Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70
PARTIES:	FOSTIF PTY LTD v CAMPBELLS CASH & CARRY PTY LTD; ARRILLA PTY LTD v ACN 001 259 301 PTY LTD; BERNEY v AUSTRALIAN LIQUOR MARKETERS PTY LTD; WHELAN & HAWKING PTY LTD v IGA DISTRIBUTION (VIC) LTD; MURRAY & ANOR v QUEENSLAND INDEPENDENT WHOLESALERS LTD; NIENDORF & ANOR v IGA DISTRIBUTION (SA) LTD; WILLIAMSON & ANOR v COMPOSITE BUYERS LTD; GOW & ORS v IGA DISTRIBUTION PTY LTD;
FILE NUMBER(S):	CA 41048/03; 41051/03; 41052/03; 41053/03; 41054/03; 41056/03; 41057/03; 41058/03
COUNSEL:	Appellant: S Gageler SC/ M Leeming/ R Dick/ P Carr Respondents: I M Jackman SC/ S Goodman (ACN 001 259 301 Pty Ltd) A C Archibald QC/ H K Insall SC (Other Respondents)
SOLICITORS:	Appellant: Robert Richards Respondents: Freehills (Campbells Cash & Carry, Australian Liquor Marketers, IGA Distribution, Queensland Independent, Composite Buyers) - Speed & Stacey (ACN 001 259 301 Pty Ltd)

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT JUDICIAL OFFICER:	Einstein J