Hall v Australian Finance Direct Limited (No 3)
[2007] VSC 366
•2 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2023 of 2004
| DANIEL HALL | Plaintiff |
| v | |
| AUSTRALIAN FINANCE DIRECT LIMITED | Defendant |
---
JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 September 2007 | |
DATE OF RULING: | 2 October 2007 | |
CASE MAY BE CITED AS: | Hall v Australian Finance Direct (No 3) | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 366 | |
---
Practice and procedure – Group proceeding – Representative party not a member of one sub-group – Whether sub-group must have a member as a party – Application by defendant for stay of proceeding until sub-group representative party appointed – Supreme Court Act 1986 s33Q – Supreme Court (General Civil Procedure) Rules 2005 Rule 23.01
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Collins S.C. with Mr P Over | Slater & Gordon |
| For the Defendant | Mr P Jopling QC with Mr D Robertson | Dibbs Abbott Stillman |
HER HONOUR:
The proceeding
This is a group proceeding brought pursuant to part 4A of the Supreme Court Act 1986 (“the Act”), in which the plaintiff seeks various forms of relief on his own behalf and on behalf of the group members. The proceeding concerns a real estate investment training program called the Investment Mastery Program, which was offered to the public by National Investment Institute Pty Ltd (“NII”). The defendant (“AFD”) lent group members the $15,000 course fee for the program.
The plaintiff claims that he and the other group members were induced to participate in the program and to borrow money from AFD, in reliance upon and induced by one or more representations for which AFD is liable. The plaintiff also claims that AFD failed to disclose to group members the fact that AFD did not pay to NII the entire amount borrowed by group members, instead, it withheld certain amounts, called “holdbacks”, for its own benefit.
AFD has made various unsuccessful attempts to have this proceeding stayed or terminated as a group proceeding. In Hall v Australian Finance Direct[1], I dismissed AFD’s applications for orders: that the writ be set aside or the proceeding stayed, pursuant to s33C of the Act; that the proceeding not continue as a group proceeding, pursuant to s33N of the Act; alternatively, that the plaintiff’s claim be stayed as an abuse of process, pursuant to r23.01(1)(c) of the Supreme Court (General Civil Procedure) Rules 1996. In Hall v Australian Finance Direct (No 2)[2], I dismissed a further application for an order pursuant to s33N that the proceeding not continue as a group proceeding.
[1][2005] VSC 306.
[2][2007] VSC 233.
By summons issued on 24 August 2007, AFD seeks an order that the proceeding be stayed pursuant to r23.01, until sub-group representative parties have been appointed pursuant to s33Q[3] of the Act in respect of:
(a) The “NII representation group members”, defined in paragraph 13 of the plaintiff’s third further amended statement of claim dated 3 July 2007 (“the claim”); and
(b) The group members referred to in paragraph 61A of the claim.
[3] Section 33Q provides as follows:
33Q Where not all questions common
(1) If it appears to the Court that determination of the question or questions common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining questions.
(2) In the case of questions common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person who consents to the appointment to be the sub-group representative party on behalf of the sub-group members.
(3) If the Court appoints a person other than the plaintiff to be a sub-group representative party, that person, and not the plaintiff, is liable for costs associated with the determination of the question or questions common to the sub-group members.
The first of those two matters is no longer pressed. The plaintiff has agreed to amend the claim to remove any ambiguity as to whether he is a member of the NII representation group. That leaves paragraph 61A as the only live issue on AFD’s summons.
AFD’s summons was heard at the same time as a summons issued by the plaintiff on 20 August 2007, which seeks:
(a) To add Paul Askin as a second plaintiff, as representative party of the sub-group described in the claim as “the no course group members”, and to amend the claim accordingly; and
(b) The approval of the form of notice to group members under s33X of the Act, and to fix a date for group members to opt-out of the proceeding.
AFD does not oppose the application to add Mr Askin as a second plaintiff and to make consequential pleading amendments. In so far as there was a dispute between the parties as to the form or contents of the proposed notice, or when it should be given, I ruled on those matters in the course of the hearing on 11 September 2007.
AFD’s application
Paragraph 61A arises out of a claim by the plaintiff that there was a particular agreement, arrangement or understanding between AFD and NII (“the holdback agreement”), that AFD would not advance to NII the whole of the amount of finance or credit borrowed by each group member pursuant to their respective AFD credit contracts, but would retain holdback amounts.
The plaintiff pleads that, by reason of the holdback agreement, the amount advanced by AFD to each group member is less than the amount referred to in their AFD credit contract (para 60).
In those circumstances, the plaintiff pleads that AFD is only entitled to recover the amount paid by it on behalf of the plaintiff and each group member to NII on their behalf, being the NII course fee less amounts deducted pursuant to the holdback agreement, together with interest (para 61). He seeks a declaration to that effect (para B(4) of the prayer for relief).
Para 61A goes on to claim that those group members who have made payments to AFD under their AFD credit contracts which exceed the amount paid by AFD to NII on their behalf, together with interest thereon, are entitled to recover the amount of such excess from AFD. The plaintiff seeks a declaration to that effect (para B(5)) and restitution of the amount of such excess (para A(7) of the prayer for relief). It is common ground that neither Mr Hall nor Mr Askin is a person entitled to claim under para 61A.
The plaintiff argues that para 61A does not make a claim, it merely identifies alternative relief sought by those group members who have repaid their AFD credit contracts. However, I agree with AFD that para 61A does form part of the pleading of the relevant cause of action, in so far as it pleads that some group members have made payments in excess of the amount paid by AFD to NII. It is not merely a pleading of the relief sought.
AFD argues that the entire proceeding should be stayed because a plaintiff cannot advance a claim in a group proceeding which is not personally maintainable by him.
There is no provision in part 4A which expressly prohibits a plaintiff from advancing a claim in a group proceeding which is not personally maintainable by him. On the contrary, the general nature of part 4A supports the plaintiff’s, rather than AFD’s, argument.
To validly commence a group proceeding, s33C requires that the claims of seven or more people against the same person are in respect of, or arise out of, the same, similar or related circumstances. There must be at least one substantial common question of law or fact. A representative party is not required to have the same claim as every other group member.
A person who has sufficient interest to commence a group proceeding has sufficient interest to continue it “even though the person ceases to have a claim against the defendant” (s33D). That indicates a clear legislative departure from the usual rule which applies in non-group proceedings, namely, that a plaintiff cannot maintain a proceeding if it ceases to have a claim against the defendant.
If it appears to the court that determination of the question or questions common to all group members will not finally determine the claims of all group members, the court may give directions in relation to the determination of the remaining questions (s33Q(1)). One of the things the court may do is establish sub-groups in the case of questions common to the claims of some only of the group members (s33Q(2)). If a sub-group representative is appointed, that person, and not the plaintiff, is liable for costs associated with the determination of the questions common to the sub-group members (s33Q(3)). But the Act does not compel the court to establish sub-groups, or prohibit the continuation of the proceeding unless sub-groups are appointed.
In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd[4], Gillard J rejected the same argument as that advanced by AFD here. That case arose out of the Longford Plant gas explosion. When the proceeding was commenced, there were three plaintiffs, each representing a particular group, being business users, domestic users and stood-down workers. The second plaintiff, a domestic user, sought and obtained an order that he cease to be a party, after the proceeding was transferred from the Federal Court to this court. His Honour then had to consider appropriate pre-trial directions.
[4][2001] VSC 372.
Although the stood-down worker plaintiff was a domestic user, he had suffered no property damage and could not represent this sub-group in relation to property damage. The remaining two plaintiffs proposed that another member of the domestic users group, who was not a party to the proceeding, would give evidence about the property damage they had suffered as a result of the gas stoppage. The defendants opposed that course and submitted that a member of the domestic users group should be joined as a plaintiff. There, as here, the defendants argued that a plaintiff could not bring the proceeding on behalf of a defined group, unless the plaintiff was a member of the group and had the same cause of action as other members of the same group.
After considering in some detail various provisions in part 4A, Gillard J held:
In my opinion, there is nothing in Part 4A of the Act which requires that there has to be a plaintiff for each group. Certain prerequisites have to be satisfied, but there is nothing which precludes a plaintiff whose claim is the same as those constituting one group, also bringing the proceeding on behalf of other members of another group, so long as the three threshold features are present. In my view, the provisions referred to above make that clear.
In my opinion, it follows that it is open to a plaintiff to call a witness who may give evidence of factual matters, which do not assist the plaintiff’s claim but do raise for consideration and determination, a question of fact or law which is common to some or all members of a group.
In my view, the court should endeavour to decide as many common questions of fact and law in a group proceeding, to facilitate the outcome of the litigation. If some questions are only relevant to some group members and not all, or to one group and not the other, so be it. As long as it may have some substantial practical effect in the determination of the litigation, one of the objects of group litigation is achieved.
It follows that, in my opinion, the plaintiffs are entitled to call, as witnesses, any member of a group in order to adduce evidence which is relevant to any issue raised, and a plaintiff may represent a group even though he is not a member of that group.[5]
[5]Ibid at [48] – [51].
Gillard J went on to note[6] that the defendants had sought to rely on the observation by Hedigan J in Pasminco v Cook[7], that “it would be … unacceptable to permit a group proceeding to be maintained in which causes of action which were not open to or made by any named plaintiff could be advanced on behalf of group members.” AFD also seeks to rely on Hedigan J’s observation. Gillard J held that Hedigan J’s observation “is not authority for the proposition that the legislation does not permit what is proposed by the plaintiffs.”[8] I respectfully agree with Gillard J’s conclusion, for the following reasons.
[6]Ibid at [52].
[7][2000] VSC 534.
[8]Ibid at [52].
One of the issues before Hedigan J was whether the group proceeding before him met the threshold requirements of s33C(1). His Honour held that two entirely separate possible group proceedings had been “collapsed” into the one proceeding brought by two unconnected sets of plaintiffs for two unconnected groups; and that the requirements of s33C(1) were therefore not met. Accordingly, His Honour’s observation, quoted above, was said by way of obiter dicta, when he went on to consider the following alternative argument.
In that case, the first plaintiff was the only one of the four plaintiffs who owned real property. As she was an undischarged bankrupt, his Honour said:
Thus there is no named plaintiff who could represent any of the group members in any claim for property damage or economic loss on the basis that the plaintiff has a claim maintainable at law for it. It would be, it seems to me, unacceptable to permit a group proceeding to be maintained in which causes of action which were not open to or made by any named plaintiff could be advanced on behalf of group members.[9]
[9]Ibid at [48].
His Honour did not directly address the question of the court’s power to permit a representative party to advance a claim on behalf of a sub-group of which they were not a member. Rather, he appears to have been addressing the desirability or acceptability of allowing that to occur in the particular case before him. His reasoning in relation to this matter was not detailed, and he noted that he did “not propose to take this aspect further” because it was unnecessary for him to decide.[10]
[10]Ibid at [49].
For the reasons expressed by Gillard J in the Esso case, part 4A does not preclude the plaintiff from representing the para 61A sub-group, even though he is not a member of that sub-group. It follows that AFD’s application for a stay pursuant to rule 23.01 must fail.
The question raised by s61A will only arise after determination of the holdback agreement allegations. I have previously held that the holdback agreement allegations raise a number of highly contentious common questions of fact and law, and Mr Hall can properly represent group members in having those common questions determined. How the issues raised by para 61A may best be tried is a matter which can be considered when the court is considering pre-trial directions. If the issues raised by para 61A are to be determined at the trial, the court will need to determine whether it is appropriate for the plaintiff to call a group member to give evidence about the matters raised by para 61A or to appoint a sub-group representative.
Even if, contrary to the above, the plaintiff was not able to advance the claim made in para 61A, I would only stay the claim made in that paragraph. There is no proper basis for ordering a stay of the entire proceeding, as sought by AFD.
The only remaining matter is the question of the costs of AFD’s summons. AFD has been unsuccessful in relation to its application for a stay on either ground. It has lost completely in relation to para 61A. However, it argues that it has been partially successful in relation to the “NII representation group members”, in that the plaintiff has agreed to further amend his claim to make it clear that he is a member of that group. The plaintiff has always said that he is a member of that group, and any ambiguity in para 13 of the existing pleading was not such as to justify making an application to stay the entire proceeding. Whilst the manner in which the plaintiff has gone about amending his pleadings on numerous occasions, and taken his time considering whether to add sub-group representative parties, is a source of frustration to AFD as well as the court, those matters would not appropriately be reflected in a costs order on this particular summons. I will order that the defendant pay the plaintiff’s costs of the summons.
---
4
0