Johnstone v HIH Ltd

Case [2004] FCA 190

FEDERAL COURT OF AUSTRALIA

Johnstone v HIH Limited [2004] FCA 190

PRACTICE AND PROCEDURE - REPRESENTATIVE PROCEEDINGS - pleading - particulars - motion to strike out pleadings - purpose of pleadings and particulars generally - particulars of alleged state of mind - inadequacy of pleadings - deficient formulation of pleadings - requirement that material facts and allegations be properly pleaded - (CTH) Federal Court Rules O 11, O 12.

PRACTICE AND PROCEDURE - REPRESENTATIVE PROCEEDINGS - threshold requirements for bringing representative proceedings in the Federal Court - every group member must have a claim against all respondents - pleadings must describe or otherwise identify the group members - claims must arise of out of similar or related circumstances - claims must give rise to substantial common issues of law or fact - requirements for applications commencing a representative proceeding - necessity of being able to define with precision who the members of the group are - group members' ability to opt out - possibility of meeting requirements by redrafting pleadings - (CTH) Federal Court of Australia Act 1976 ss 33C, 33H, 33N.

CORPORATIONS - shareholders - noteholders - diminution in share value - company as proper claimant - derivative actions - where shareholder or noteholder has suffered personal loss - case law unsettled - shareholder or noteholder may be able to sue on the basis of a loss that is separate and distinct from any entitlement of the company.

TRADE PRACTICES - misleading and deceptive conduct - misleading and deceptive conduct by silence - pleading of material facts must justify conclusion that silence would amount to misleading and deceptive conduct - accessorial liability - knowing involvement - requisite knowledge - reliance - requirement of a precise formulation of the causal nexus between the conduct alleged and the loss claimed - (CTH) Trade Practices Act 1974 ss 52 and 75B.

PRACTICE AND PROCEDURE - SECURITY FOR COSTS - security for costs application - orders for costs against individuals only to be made in rare circumstances - financial hardship - frustration of proceedings - strength of applicant's case - orders sought at premature stage - issues impossible to determine on present pleadings.

PRACTICE AND PROCEDURE - REPRESENTATIVE PROCEEDINGS - direct communication by solicitors to group members - solicitors made statements about potential group members' ability to join group proceedings and their financial liabilities - statements inaccurate - effect of statements - discretion of the Court to determine matters in relation to representative actions - ability of Court to order notices be given to group members - rectification of misleading communications to group members - correction letter necessary - (CTH) Federal Court of Australia Act 1976 Pt IVA

Federal Court of Australia Act 1976 (Cth) Part IVA
Trade Practices Act 1974 (Cth) ss 52 and 75B
Corporations Act 2001 (Cth) ss 79 and 995
Fair Trading Act 1987 (NSW) s 68

Federal Court Rules

Dare v Pulham (1982) 148 CLR 658 referred to
Lyons v Kern Konstructions (Townsville) Pty Limited (1983) 47 ALR…

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AGLC
Johnstone v HIH Ltd [2004] FCA 190
Case
[2004] FCA 190
Decision Date

CaseChat Overview and Summary

The matter of Johnstone v HIH Ltd was heard in the Supreme Court of New South Wales. The dispute involves the plaintiff, Johnstone, who is pursuing a class action against HIH Limited, among other respondents, over alleged breaches of fiduciary duty and mismanagement of funds. The central issue revolves around the sufficiency and propriety of the application and the accompanying statement of claim, particularly in the context of the class action status and the necessity for security for costs.

The legal issues before the court were whether the proceeding should be dismissed, discontinued as a class action, or if security for costs was required at that stage. Additionally, the court had to assess the deficiencies in the application and statement of claim to determine if they warranted a strike-out of the proceedings.

The court found that there were significant deficiencies in the application and the accompanying statement of claim, necessitating amendments and substantial recasting. However, the court did not deem it appropriate to strike out the proceedings as the requisite threshold of satisfaction had not been met. The judge granted the applicant leave to amend and refurnish the application and the statement of claim. The court provided detailed directions for the preparation of draft short minutes, a letter of correction, and an affidavit detailing the recipients of the previous correspondence. The matter was stood over to allow the parties to formulate appropriate orders and to address the costs of the interlocutory applications.

In conclusion, the court ordered that the parties prepare draft short minutes reflecting the reasons for the decision, including orders regarding the costs of the interlocutory applications. The court also mandated the preparation and filing of a draft letter of correction, to be sent to all relevant parties, and required an affidavit detailing the recipients of the previous correspondence. The matter was stood over to allow for the settlement of these orders.

Orders

Orders of the court

1. I direct the parties to bring in Draft Short Minutes to give effect to these reasons, including appropriate orders as to the costs of the interlocutory applications, and I stand the matter over until 26 March 2004 at 2.15 pm for settlement of the orders.

2. I direct Messrs Dennis and Co, solicitors for the applicant, to file with the Court and serve on the respondents a Draft Letter of Correction to be sent to all addressees of the letter of 22 September 2003 in accordance with these reasons. Such draft shall be filed with the Court and served on the respondents on or before 19 March 2004. I will hear submissions as to the final form of that letter on 26 March 2004 at 2.15 pm.

3. Messrs Dennis and Co shall file on or before 19 March 2004 an affidavit setting out the names and addresses of all persons to whom that letter was sent.

4. The matter is stood over to 26 March 2004 at 2.15 pm.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

TAMBERLIN J
I do not accede to the applications that the proceeding be dismissed or that it be discontinued as a class action or that security for costs of the fifth respondent be required at this stage and I reserve the right of the respondents to raise these matters at a later stage.CONCLUSION For the reasons given above, it is apparent that there are significant deficiencies in the Application and the ASC and that they must be amended and substantially recast. I do not consider it appropriate at this point to strike out the proceedings, as I do not think the requisite threshold of satisfaction has been established. I propose to grant leave to the applicant to amend and refurnish the terms of the Application and the Statement of Claim. To enable the parties to formulate appropriate orders, I give the following directions: I direct the parties to bring in Draft Short Minutes to give effect to these reasons, including appropriate orders as to the costs of the interlocutory applications, and I stand the matter over until 26 March 2004 at 2.15 pm for settlement of the orders. I direct Messrs Dennis and Co, solicitors for the applicant, to file with the Court and serve on the respondents a Draft Letter of Correction to be sent to all addressees of the letter of 22 September 2003 in accordance with these reasons. Such draft shall be filed with the Court and served on the respondents on or before 19 March 2004. I will hear submissions as to the final form of that letter on 26 March 2004 at 2.15 pm. Messrs Dennis and Co shall file on or before 19 March 2004 an affidavit setting out the names and addresses of all persons to whom that letter was sent. The matter is stood over to 26 March 2004 at 2.15 pm.

Ratio Decidendi

Legal Principle Established

Established by: TAMBERLIN J

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