King v AG Australia Holdings Ltd

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FEDERAL COURT OF AUSTRALIA

King v AG Australia Holdings Ltd (formerly GIO Australia Holdings Ltd)

[2002] FCA 872

PRACTICE AND PROCEDURE – Group proceedings – whether a respondent in group proceedings can communicate with unrepresented members of the group – whether leave or court approval is necessary or desirable before any written communication is sent – whether communication between the respondent and members of the group should only be in writing – whether there is a fiduciary relationship between the solicitors for the representative party and unrepresented members of the representative group.

PRACTICE AND PROCEDURE – Group proceedings – settlement of individual claims – whether a respondent in group proceedings can make offers of settlement to individuals in the representative group – whether court involvement or approval is required – whether parties to a proceeding can reach settlement without the involvement of their legal representatives – whether the court can require that a portion of settlement monies be set aside for the payment of the representative party’s legal costs – where unrepresented parties have chosen not to retain and sign a fee agreement with the representative party’s solicitor.

PRACTICE AND PROCEDURE – legal professional privilege – whether privilege was waived by the representative party’s solicitor’s reference to their instructions in an affidavit read in Supreme Court proceedings – extent of disclosure – whether it would be unfair to continue to assert the privilege in view of the extent of disclosure.

PRACTICE AND PROCEDURE – leave to use affidavit and notice of motion filed in the Federal Court in contempt proceedings to be commenced in the NSW Supreme Court – whether leave is required – whether the contents of the documents were disclosed for the purposes of O 15 r 18 –whether the respondents wished to use the notice of motion and affidavit “in relation to the litigation in which they were disclosed” – whether anything said or done in Federal Court proceedings is immune from contempt proceedings in another jurisdiction – other issues affecting the exercise of the discretion.

Federal Court of Australia Act 1976 (Cth), s 33V, s 33W, s 33ZF, s 33ZJ, Pt IVA, s 43(1A)
Federal Court Rules O 15 r 18

King v GIO Australia Ltd (2000) 100 FCR 209
Duke of Bedford v Ellis [1901] AC 1
Sullivan v Pearson; ex parte Morrison (1864) LR 4 QB 153
The Hope (1883) 8 PD 144
Arthur J.S.Hall v Simons [1999] 3 WLR 873
Shepherd v Australian and New Zealand Banking Group Ltd (1996) 20 ACSR 81
McMullin v ICI Australia Operations Pty Ltd (Wilcox J, 27 November 1997, Unreported)
Lopez v Star World Enterprises Pty Ltd [1999] FCA 104
Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398
Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27
King v GIO Australia [2001] FCA 270
Femcare Ltd v Bright (2000) 100 FCR 331 followed
Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250
Project Blue Sky v Australian Broadcasting…

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Details
Case
[2002] FCA 872
Decision Date

CaseChat Overview and Summary

In King v AG Australia Holdings Ltd, the primary issue revolved around the communication protocols between GIO and the members of the group for whom the representative proceeding was being maintained, alongside the validity of Part IVA of the relevant Act. The case involved Mr King who, through his solicitors Maurice Blackburn Cashman (MBC), initiated a representative proceeding against GIO, alleging that GIO's conduct caused financial loss to shareholders. The court was tasked with determining whether GIO could lawfully communicate with the group members and if Part IVA of the Act was valid.

The court examined the specific communication methods and their compliance with the orders set by the Supreme Court. It also considered whether the filing of the notice of motion and the affidavit in question constituted a breach of these orders. The court deliberated on the potential for selective enforcement of the orders, wherein certain actions might be deemed non-compliant while others were not, thereby complicating the contempt proceedings. The court acknowledged the possibility that the application might not be in contempt, leaving unresolved the issue of whether specific actions, such as the swearing and filing of the affidavit and conversations with opposing solicitors, were indeed in breach of the orders.

The court concluded that while the making and pursuit of the application might not constitute contempt, other actions might still be in breach of the court orders. To address this, the court proposed making the order subject to further directives, allowing for the possibility of future applications if needed. Additionally, the court ruled that Maurice Blackburn Cashman must provide GIO with lists of individuals who had signed fee and retainer agreements and those who had registered an interest. GIO, in turn, was required to share drafts of correspondence intended for the representative group with MBC ten days prior to sending. The court also stipulated that GIO could only communicate with group members in writing and needed court leave to send any settlement offers.

The final orders included directives for both parties to exchange specific lists of individuals, required GIO to submit draft correspondence to MBC, and restricted GIO from sending settlement offers without court approval. The court dismissed the notice of motion filed by GIO on 3 April 2002 and denied leave to use the affidavit sworn on 30 May 2002, while allowing the parties to apply on short notice regarding correspondence.

Orders

Orders of the court

1. Maurice Blackburn Cashman (“MBC”) provide the first respondent with a list identifying the names and addresses of people or corporations who have signed fee and retainer agreements with MBC and a list identifying the names and addresses of people or corporations who have registered an interest with MBC.

2. The first respondent forward to MBC a draft of any correspondence it proposes to send itself or by its solicitors to individuals in the representative group in connection with this proceeding at least ten days before the correspondence is to be sent.

3. Subject to further order, in relation to this proceeding the first respondent shall only communicate itself or by its solicitors with individuals in the representative group in writing.

4. Subject to further order, no offer of settlement shall be sent to any group member by or on behalf of the first respondent without the leave of the Court.

5. The notice of motion of the first respondent filed 3 April 2002 otherwise be dismissed.

6. Subject to further order, the first respondent is refused leave to use the affidavit of Mr Murphy sworn on 30 May 2002.

7. In relation to correspondence referred to in order 2, the parties have liberty to apply on two days notice.

Background

Background to the litigation

One issue dealt with in this judgment concerns whether, and the way in which, GIO can communicate with members of the group on whose behalf the representative proceeding is being maintained. A related question is said to be whether Part IVA of the Act is valid.Background The representative proceeding was commenced by Mr King on 31 August 1999. His solicitors are the firm Maurice Blackburn Cashman (“MBC”). The representative group was identified in the pleadings (as modified by subsequent amendments):“The group members to whom this proceeding relates (‘the group members’) are all persons who owned shares in GIO continuously between 25 August 1998 and 4 January 1999 (‘the relevant period’) and who did not accept the takeover offers for those shares made by AMP Insurance Investment Holdings Pty Ltd (“AMP”) on 25 August 1998 (and varied on 9 December 1998) by reason of the conduct alleged in this Seventh Further Amended Statement of Claim of all (or alternatively, any) of the Respondents and who suffered loss as a consequence, but the group members do not include:(a) Grant Samuel or any body corporate related to GIO or Grant Samuel (within the meaning of s.50 of the Corporations Law); (b) any related entity of GIO or Grant Samuel (within the meaning of s.9 of the Corporations Law);(c) any proprietary company of which any of the Directors is a director or shareholder, or the beneficiary of any trust of which any such Director or corporation is the trustee; and (d) AMP Ltd and any related body corporate of AMP Ltd (within the meaning of s.50 of the Corporations Law) or any director thereof.” Since the proceeding commenced, 21,646 former GIO shareholders (“the MBC clients”) have signed fee and retainer agreements with MBC and a further 5,638 (“the MBC potential clients”) have registered an interest with that firm. The number of shareholders who might have constituted the representative group when the proceeding was commenced totalled 67,224 (“the total shareholder group”). In early 2001, notices were sent to members of the group pursuant to s 33X(1)(a) concerning their right to opt out of the proceeding. Since then in excess of 17,800 shareholders have opted out. Accordingly, of the total shareholder group, there are approximately 50,000 (GIO puts the number at 49,399) who have not opted out (“the representative group”). In the notice sent pursuant to s 33X(1)(a), a group member was described in the following way:“You are a group member if you:(a)owned shares in GIO continuously between 25 August 1998 and 4 January 1999; and(b)did not accept the takeover offer for those shares made to you by AMP on 25 August 1998 and varied on 9 December 1998; and(c)did not accept the takeover offer by reason of the various representations and conduct of the Respondents detailed in the Statement of Claim; and (d)suffered a loss as a consequence; and(e)have a claim against all the Respondents.” Some recipients of this notice, who were part of the total shareholder group, may have considered they were not group members because they did not satisfy one or all of the conditions of group membership set out in pars (c), (d) and (e) of the description in the notice. Those recipients who took this view may well have also considered it was unnecessary to complete and return an opt out notice. Some recipients of the notice may, for example, have known that nothing had been said to them by the respondents during the hostile takeover that caused them to retain their shares. There may be large institutional shareholders who took independent advice which were in this position. There may be small shareholders who retained their shares for quite idiosyncratic reasons who were also in this position. For these reasons no opt out notice may have been returned. While at the moment, these are essentially matters of speculation (subject to the evidence referred to in the next paragraph), it may be, at least as a matter of fact, that not all members of the representative group believe or assert they have a cause of action (of the type pleaded by Mr King) against the respondents. Other members of the total shareholder group who did not opt out and are not MBC clients or MBC potential clients, may well have conscientiously addressed the notice and considered themselves members of the group having regard to the description in the notice and, for this reason, did not opt out.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MOORE J
If the filing of the notice of motion and the pursuit of the application is in breach of the orders of the Supreme Court then it is probable that the swearing and filing of the affidavit is also in breach of those orders and conversations Mr Murphy had with Mr Burton's solicitor were similarly in breach of those orders. However, the orders might operate in a way where the former was not constrained but the latter was. That is, the notice of motion could be filed and the application pursued but the affidavit could not be sworn and filed nor could Mr Murphy converse with Mr Burton solicitor in the way he deposed. It is therefore possible that a conclusion might be reached in this proceeding that the making and pursuit of the application was not in contempt which might leave unresolved the question of whether the swearing and filing of the affidavit, and/or the conversations deposed to, were in breach of the orders. I propose to accommodate this possibility by making the order refusing leave, subject to further order. That is, GIO can renew its application at a later date if necessary. Moreover it may possibly be (though I accept it is unlikely) that this Court could exercise jurisdiction in relation to contempt of another superior court of record: see John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351 but see also Sidebottom v Giuliano [1999] 95 FCR 255 and Re Colina; ex parte Torney (1999) 200 CLR 386 concerning the jurisdiction of a federal court to punish a contempt.Conclusion For the preceding reasons I propose to order that MBC provide GIO with a list identifying the names and addresses of people or corporations who have signed fee and retainer agreements with MBC and a list identifying the names and addresses of people or corporations who have registered an interest with MBC. I also propose to order that GIO forward to MBC a draft of any correspondence it proposes to send to individuals in the representative group ten days before the proposed date of sending it. Subject to further order, I will order that no offer of settlement be sent to any group member by GIO without the leave of the Court. In relation to the notice of motion of the first respondent filed 12 June 2002 leave will be refused to use the affidavit. In relation to correspondence GIO wishes to send to members of the representative group (other than offers of settlement), the parties have liberty to apply on two days notice.

Ratio Decidendi

Legal Principle Established

Established by: MOORE J

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