Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 1)
[2011] VSC 167
•10 May 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 4788 of 2009
| CAROL ANN MATTHEWS | Plaintiff |
| v | |
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) | Defendant |
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) | Plaintiff by counterclaim |
| v | |
| UTILITY SERVICES CORPORATION LIMITED (ACN 060 674 580) & ORS | Defendants by counterclaim |
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JUDGE: | J FORREST J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 March 2011 | |
DATE OF RULING: | 10 May 2011 | |
CASE MAY BE CITED AS: | Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 1) | |
MEDIA NEUTRAL CITATION: | [2011] VSC 167 | |
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PRACTICE AND PROCEDURE – Application by plaintiff to regularise proceeding issued by solicitors without authority - Application by defendants to dismiss proceeding as an abuse of process – Group proceeding issued without authority of the representative plaintiff – Group proceeding – Part 4A Supreme Court Act – Power of the Court to regularise proceeding – Ratification of irregularly issued proceeding – Prejudice to group members - Abuse of process – Effective substitution of representative plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Richter QC Mr M J Lee Ms M Szydzik | Maurice Blackburn & Co |
| For SPI Electricity Pty Ltd | Mr B Quinn | Freehills |
| For USC | Mr W R Ray QC Ms E Brimer | Holman Fenwick Willan |
| For the Third, Fourth and Fifth defendants (the State defendants) | Mr P Riordan SC Mr M Rush | Norton Rose |
| For Oldham Naidoo | Mr M Stirling | Middletons |
HIS HONOUR:
Introduction
Within 10 days of the Black Saturday bushfires which devastated so much of Victoria on 7 February 2009, Slidders Lawyers (now Oldham Naidoo)[1] issued this proceeding for damages against two power companies[2] in relation to the Kilmore East and Beechworth fires.
[1]On 4 June 2010 Slidders Lawyers Pty Ltd changed its name to Oldham Naidoo Lawyers Pty Ltd. To avoid confusion I have referred to the company as Oldham Naidoo.
[2]Neither company is the current defendant – in August last year SPI Electricity Pty Ltd was substituted as the defendant.
Mr Leo Keane was the named representative plaintiff in what is colloquially known as a class action – a group proceeding under Part 4A of the Supreme Court Act 1986 (Vic).
Oldham Naidoo did not have instructions or authority from Mr Keane to issue the writ. Indeed, it was the Kilmore East fire that burnt out Mr Keane’s property; his claim was unrelated to the Beechworth fire. Within days, he asked the solicitors to remove his name from the writ.
Oldham Naidoo made no attempt to remove Mr Keane as plaintiff for over a year, notwithstanding that the proceeding had been brought without his authority and involved a risk that Mr Keane would be liable for any order for costs obtained by the defendants against him. The solicitors conduct was a patent and egregious abuse of process, particularly given that the representative claim was brought on behalf of many injured and grieving persons who could not have known what was going on behind the scenes in the solicitors’ office.
In July last year Mrs Carol Matthews replaced Mr Keane as the representative plaintiff in this proceeding. Subsequently, another four defendants were added to Mrs Matthew’s claim. Then in March this year, Maurice Blackburn & Co (which had the joint conduct of the proceedings), became aware of Oldham Naidoo’s unauthorised actions. Maurice Blackburn played no part in the abuse of the Court’s processes and acted promptly and diligently in bringing Oldham Naidoo’s conduct to the attention of the Court and the other parties.
Mrs Matthews now applies to the Court to regularise the proceeding to overcome the deficiencies caused by the conduct of Oldham Naidoo. Her application has motivated each of the Defendants SPI[3], USC[4] and the State defendants[5] to oppose orders which would have had that effect and permitted the group proceeding to continue. They seek to have the proceeding dismissed as an abuse of process.
[3]The first defendant, SPI Electricity Pty Ltd.
[4]The second defendant, Utility Services Corporation Limited.
[5]The third, fourth and fifth defendants, the Secretary to the Department of Sustainability and Environment, the Country Fire Authority and the State of Victoria – jointly represented and collectively referred to as “the State defendants”.
On first glance, one might ask: what is all the fuss about. Surely, Mrs Matthews can re-issue the claim on behalf of the group as no limitation of actions point arises and orders might be made in relation to the adoption of steps taken in this proceeding. But as it emerged there is a real point here – the entitlement of the representative plaintiff and the group members to interest, statutory or otherwise, from the date on which the proceeding was issued. And it is no small amount. If Mrs Matthews has to re-issue then she and the group will be shut out of their entitlement to interest from the date of issue of the proceeding (assuming the claim is successful). On the other hand, the defendants contend that this is an unwarranted windfall as no competent solicitor worth his or her salt would have issued this proceeding until the Bushfire Royal Commission was concluded.
Essentially, I am required to determine three interwoven issues:
(a)whether the lack of authority of the solicitors in issuing the proceeding is fatal to the claim now brought on behalf of the group members by Mrs Matthews under Part 4A of the Supreme Court Act;
(b)whether the purported ratification by Mr Keane or Mrs Matthews of the institution of the proceeding, in effect, regularises the claim notwithstanding the lack of authority of Oldham Naidoo at the outset; and
(c)whether, regardless of any conclusion as to ratification, the proceeding should, in the interests of justice, be allowed to continue and Mrs Matthew’s application granted, or as the Defendants maintain should it be dismissed as an abuse of process. Alternatively, as I will explain, whether the interests of justice dictate any other course.
The applications
Maurice Blackburn issued, on 17 March 2011, an application seeking orders that:
1.(a) The proceedings stand for all purposes as a proceeding regularly commenced and continued pursuant to Part 4A of the Supreme Court Act 1986 by Carol Ann Matthews as against the first defendant – from 16 February 2009; and
(b)as against the other defendants – from the date on which the joinder of these defendants took effect.
2.The principals and/or directors of incorporated legal practice Oldham Naidoo Lawyers Pty Ltd (formerly Slidders Lawyers Pty Ltd) from 16 February 2009 to the present, and each of them, to be substituted for the former plaintiff Mr Leo Keane for the purpose of any order for the defendant’s costs of the proceeding incurred prior to 23 July 2010.
Oldham Naidoo consented to order two.
At the hearing, each of the defendants opposed the making of order one but, in the event that their opposition failed, did not oppose the making of order two.
Although there was no formal application before the Court to have the proceeding struck out as an abuse of process this, it seemed to me, was the inevitable consequence of successful opposition to Mrs Matthews’ application.
Accordingly, at my request, each of the defendants issued summonses seeking that the proceeding be dismissed as an abuse of process and relied upon the material filed in response to Mrs Matthews application.
Mrs Matthews also sought costs orders against Oldham Naidoo which, were consented to, provided the order was confined to party/party costs. Oldham Naidoo also volunteered to pay the Defendants’ costs of the summons on a party/party basis.[6]
[6]There remains a contest as to whether these costs are paid on a party/party or indemnity basis.
The procedural and factual background
On 13 February 2009, Mr Daniel Oldham, a principal at Oldham Naidoo, instructed Ms Dymond, an articled clerk, to select a person to be named as the representative party in a proposed class action – it was anticipated that imminent publicity would result in the firm being contacted by interested members of the public.
On Sunday 15 February 2009, articles appeared in a number of newspapers stating (incorrectly) that Oldham Naidoo had commenced legal proceedings on behalf of persons who had suffered loss and damage as a result of the Black Saturday bushfires. For instance, on page one of The Sunday Age an article titled “Huge fire class action launched”. The article contained the following statements:
“The Brumby Government and a private electricity company face one of the largest class actions in Victorian history over last weekend’s devastating firestorm.
The legal wrangle, which is expected to involve hundreds of millions of dollars and last for years, will centre on a fallen power line that is believed to have sparked the blaze that tore through Kinglake, Steels Creek and St Andrews, killing more than 100 people and destroying about 1000 homes.
…Yesterday Slidders Lawyers partner Daniel Oldham confirmed that a class action had been issued in the Supreme Court on Friday against Singapore-owned electricity company SP Ausnet, which is responsible for maintaining most of the power lines in eastern Victoria.
‘It is believed that the claim will be made on the basis of negligent management of power lines and infrastructure,’ Mr Oldham said.”
After reading one of the articles, Mr Keane registered his interest in claming his losses in the Kilmore East fire by recording his contact details with Oldham Naidoo on the firm’s website, together with a short note of the losses he alleged he had sustained in the bushfire.
On the following day, 16 February, Ms Dymond telephoned Mr Keane and confirmed with him the details of his losses. She did not seek instructions to commence any legal proceedings in his name and none were given. Mr Keane indicated, however, an interest in claming his losses from the bushfire.
That afternoon, Mr Keane was named by Oldham Naidoo as the representative plaintiff in this proceeding. A generally indorsed writ was issued against SPI Australia Networks (Distribution) Ltd and SP Australia Networks (Transmission) Ltd.
The general indorsement contained the following allegation:
1. The plaintiff brings this proceeding in accordance with Part 4A of the Supreme Court Act (Vic) as a representative of persons including land owners – and/or occupiers of land who suffered loss and damage in early 2009 as a result of bushfires in Central and North Eastern Victoria when such fires commenced by reason of faulty and/or defective power lines used for the distribution and/or transmission (‘power lines’) in Kilmore East (‘the Kilmore fire’) and Beechworth (‘the Beechworth fire’) and those fire or fires emanating from those fires spread onto their property and damaged their property.
It then alleged that both the Kilmore East and Beechworth fires were due to faulty and/or defective power lines and spread on to the plaintiff’s property. It went on to assert that both defendants owed a duty at common law and under statute, and on behalf of the land owners and occupiers sought damages for “economic loss, loss of property, compensatory damages, loss of livestock and pain and suffering.”
On the same day, the Governor-in-Council appointed Commissioners to enquire into and report on aspects of the Black Saturday bushfires, including the Kilmore East fire.[7]
[7]Entered on the record by the Secretary, Department of Premier and Cabinet in the Register of Patents Book No 44, page number 111, 16 February 2009.
On the following day, the 17th, Ms Dymond advised Mr Oldham that she had not informed Mr Keane that she had commenced a Supreme Court class action in his name. She sought advice from Mr Oldham as to what she should tell Mr Keane. Mr Oldham replied as follows:
Just say he is named and we will write further once we are able to confirm numbers and costs etc – just like 2003.
On 18 February 2009, Mr Keane became aware that the proceeding had been commenced in his name. He telephoned Ms Dymond, and as well as providing details of his losses, instructed her that he wished to be removed as a plaintiff from the class action. Ms Dymond agreed to do so. No advice was provided to Mr Keane in respect of his exposure to adverse costs orders or as to the risks and responsibilities of being the representative plaintiff.
On 15 April 2009, purportedly in compliance with r 36.03(a) of the Supreme Court Rules, the general indorsement was amended with references to the Beechworth fire deleted and claims for personal injury included.
On 14 May 2009, Oldham Naidoo and Maurice Blackburn, with Mr Keane’s approval, entered into an agreement to jointly conduct the proceedings. On the same day, a file note of Oldham Naidoo recorded a telephone conversation with Mr Keane – “We will remove him as lead plaintiff – we are assessing this at the moment in order to find a suitable substitution”.
On 15 May 2009, Robson J by consent made orders giving leave to Maurice Blackburn and Oldham Naidoo to appear as solicitors on the record and excusing the plaintiff (at that time Mr Keane) from filing a statement of claim. The proceeding was stayed, with each party having a right to proceed with the case on 14 days notice.
During the balance of 2009 and in early 2010, Mr Keane received some pieces of correspondence from Maurice Blackburn and Oldham Naidoo regarding the claim – but none dealing with his role as representative plaintiff or his instructions that he be removed as representative plaintiff.
The Royal Commission delivered its interim report in August 2009,[8] and its final report in July 2010.[9]
[8]Victoria, 2009 Victorian Bushfires Royal Commission Interim Report (2009), No. 225-Session 2006-2009.
[9]Victoria, 2009 Victorian Bushfires Royal Commission Final Report (2010), No. 332 – Session 2006 – 2010.
On 27 May 2010, Mrs Matthews entered into a conditional costs agreement with Oldham Naidoo and Maurice Blackburn. She agreed to be substituted for Mr Keane as the representative plaintiff.
On 15 June 2010, Mr Keane was telephoned by Ms Naidoo, of Oldham Naidoo, and advised a summons had been filed to substitute another person as the representative plaintiff.
On 18 June 2010, a summons was issued seeking an order substituting Mrs Matthews for Mr Keane as representative plaintiff.
On 23 July 2010, I ordered that Mr Keane be removed as plaintiff and Mrs Matthews be substituted as plaintiff. The two SP Australia Networks defendants ceased to be parties and SPI was substituted in their place.[10]
[10]Orders made on 23 July 2010 which were then varied on 4 August 2010.
On 24 September 2010, SPI filed a defence to Mrs Matthews’ claim and, by counterclaim, joined USC and the State defendants. Each of the defendants by counterclaim then filed defences to the SPI claims.
On 28 January 2011, Mrs Matthews filed an amended statement of claim joining USC and the State defendants. Her allegations against the added defendants, in practical terms, replicated the allegations made by SPI against those defendants in its counterclaim.
On 22 February 2011, Mr Walsh, of Maurice Blackburn, spoke to Mr Keane who confirmed that he had not provided instructions in relation to commencing the class action, nor had he, at that time, ratified the institution of the proceedings.[11]
[11]The factual parts of this summary are taken from the statement of facts prepared by Maurice Blackburn and attached to its letter of 3 March 2011 to Oldham Naidoo and confirmed by Oldham Naidoo as not being in dispute. Affidavit of Bernard Murphy 17 March 2011 [38] and of 23 March 2011 [6].
On 23 March 2011, Mr Keane ratified, in writing, the proceeding and all steps taken in the proceeding whilst he was the named representative plaintiff.[12]
[12]Exhibit BMM21 to the Affidavit of Bernard Murphy of 23 March 2011.
A case conference was set down for 15 April 2011 but, at my direction, has been vacated as a result of these applications.
Non-controversial matters
A number of matters are not in issue:
(a)at the time that the proceeding was instituted, it was not authorised by Mr Keane nor was there any principal/agent relationship between Mr Keane and Oldham Naidoo;
(b)Mrs Matthews authorised Maurice Blackburn and Oldham Naidoo (joint solicitors at that time) in May 2010 to apply for her to be substituted as the representative plaintiff;
(c)Mrs Matthews has, since the time of her substitution (July 2010), authorised the solicitors to maintain the action on her behalf;
(d)Mr Keane, on 23 March 2011, ratified the institution of the proceeding by Oldham Naidoo;
(e)Oldham Naidoo consented to being substituted for Mr Keane for the purpose of any costs order against Mr Keane prior to 23 July 2010.
The first issue – Does the lack of authority on the part of the solicitor in issuing a proceeding under Part 4A render it a nullity?
This was the primary submission of SPI which was, somewhat begrudgingly, adopted by the State defendants, but enthusiastically by USC.
The State defendants’ reluctance to adopt this proposition, I think, was understandable. In effect, the submission means that any proceeding brought irregularly (in this case without the authority of the named plaintiff), under Part 4A of the Supreme Court Act is incapable of cure by either subsequent action (such as ratification) or order of the Court.
If correct, this proposition results in the representative plaintiff and the group members suffering real detriment. All would necessarily be affected by an order dismissing the claim, even if that prejudice was limited to the delay caused by the institution of a fresh proceeding. That of course would be the minimal amount of prejudice – in a case involving the expiry of a limitation period, the prejudice would be far more substantial. Here such an order would deprive the plaintiff and the group members of any entitlement to interest until a fresh proceeding is issued. That is notwithstanding that since Mrs Matthews was substituted as representative plaintiff the proceeding has been regularly maintained.
I have concluded that SPI’s argument is inconsistent with statements of principle of the High Court as to irregularities relating to the commencement of proceedings. It runs contrary to a long line of authority enabling a court to regularise proceedings irregularly commenced. It is also not supported by an analysis of the provisions of Part 4A. Finally, to accept this proposition would be to act inconsistently with the legislative intent and underlying purpose of Part 4A.
I will now explain my reasoning on each of these matters.
Section 33C of the Supreme Court Act reads as follows:
33C Commencement of proceeding
(1) Subject to this Part, if—
(a) seven or more persons have claims against the same person; and
(b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and
(c) the claims of all those persons give rise to a substantial common question of law or fact—
a proceeding may be commenced by one or more of those persons as representing some or all of them.
The current version of Mrs Matthews’ statement of claim[13] describes the group as follows:
[13]Filed pursuant to leave granted on 28 January 2011.
Group members
4. The group members to whom this proceeding relates are:
(a)all those persons who suffered personal injury (whether physical injury, mental injury, psychiatric injury or nervous shock) as a result of:
(i)the Kilmore bushfire (including, without limitation, an injury suffered as a result of attempts to escape the Kilmore bushfire or other emergency action taken by any person in response to the Kilmore bushfire); and/or
(ii)the death or injury to another person as a result of the Kilmore bushfire.
(b)the estates or dependants of any person who died in or as a result of the Kilmore bushfire (including, without limitation, a death resulting from attempts to escape the Kilmore bushfire or other emergency action in response to the Kilmore bushfire); or
(c)all those persons who suffered loss or damage to property as a result of the Kilmore bushfire (including, without limitation, loss or damage resulting from emergency action taken by any person in response to the Kilmore bushfire); or
(d)all those persons who at the time of the Kilmore bushfire resided in, or had real or personal property in, the Kilmore bushfire area and who suffered economic loss, which loss was not consequent upon injury to that person or loss or damage to their property.
The number of group members represented by Mrs Matthews will be measured in the thousands. It is common knowledge that over a hundred people died as a result of this bushfire and many more, it can be readily surmised, suffered physical and psychological injury. Thousands more have property damage claims and, presumably, many others sustained “pure economic loss”.[14]
[14]Loss without antecedent damage in the form of personal injury, death or property damage.
This group proceeding is “open” in the sense that its size will not be finally determined until a judgment or settlement[15] – assuming, of course, success on the question of liability.[16] There is no suggestion here that the group is not properly defined in the pleadings or that in some way the definition of the group is amenable to attack for failure to comply with s 33C or the pleading requirements of s 33H.
[15]Ss 33Z, 33ZB, 33ZH.
[16]By contrast, a closed group is one in which the size of the group is limited by its description in the pleadings – usually by reference to an arrangement or agreement with a litigation funder or a solicitor: Multiplex Funds Management Limited v P. Dawson Nominees Pty Ltd (2007) 164 FCR 275.
The role of the plaintiff as the representative of the group is emphasised by other provisions of Part 4A. For instance, s 33D permits a person who has commenced a representative proceeding to maintain that proceeding even though he or she ceases to have a claim against the defendant. A group member does not need to give consent to be part of the group (s 33E), but may opt out of the proceeding if he or she so wishes (s 33J). However, the conduct of the proceeding is, at least nominally, undertaken by the representative plaintiff. It is the representative plaintiff, not a group member, who carries the potential costs liability (s 33ZD).
The role of the group members is recognised by a number of other provisions: as has already been noted, a group member may opt out of the proceeding at the appropriate time. Section 33X(1) provides that where a proceeding is liable to be struck out for want of prosecution, notice must be given to group members. Group members are also protected from the effect of any limitation provision that applies to the claim of a member which is suspended once the group proceeding is commenced (s 33ZE).
Section 33T enables a group member to apply to the Court for substitution of the representative plaintiff if that plaintiff is not able to adequately represent the interests of group members.
Once the group proceeding is initiated it cannot be settled or discontinued without the approval of the Court (s 33V). A judgment of the Court on issues of liability and damages (s 33Z) binds all persons who are group members at the time of judgment (s 33ZB).
Some potential claimants may opt out at the appropriate time[17]–if they do not they will be bound by any judgment of the court. Equally they will be bound by this ruling unless they opt out.
[17]To be fixed by the Court pursuant to s 33J
The High Court in Mobil Oil Australia Pty Ltd v Victoria[18] said as follows of the representative procedure under Part 4A, and in particular the role of the plaintiff and the of the group members:
The persons who commence the proceeding are the plaintiffs… Obviously, those who are named as plaintiffs in a group proceeding must know of and require the commencement of the proceeding. In general, it is they who may appeal (s 33ZC)and who are liable in costs (s 33ZD). They stand to gain from any benefit obtained by the proceeding but they are at risk of bearing the burden of costs.
The position of the plaintiffs in the proceeding may be contrasted with those whom they represent - the group members. Subject to some exceptions that do not matter for present purposes, the consent of a person to be a group member is not required (s 33E). Group members may neither know of the commencement of the proceeding nor wish that it be brought or prosecuted, although Pt4A does provide for notice to be given to group members of (among other things) the commencement of the proceeding (s 33X(1)).
The Supreme Court may dispense with the giving of that notice if the relief sought in the proceeding does not include a claim for damages (s 33X(2))and, if notice is to be given, it may be given by press advertisement, radio or television broadcast or any other means (s 33Y(3)). Unless the Supreme Court is satisfied that it is reasonably practicable, and not unduly expensive, to do so the Court may not order that notice of the proceeding is to be given personally to group members(s 33Y(4)). There is, therefore, a real possibility that some group members would remain "perfectly ignorant of the proceedings, and of what is really going on". That is, some of those who would benefit from success in the proceeding (but thereby lose the opportunity to pursue their individual claim in some way, or to some effect, different from the group proceeding) may have their rights affected without their knowing or consenting to that being done.
So much follows from the fact that Pt4A provides for what is sometimes called an "opt out", rather than an "opt in", procedure. That is, persons who are group members may opt out of the proceeding and, if they do, they are taken never to have been a group member (unless the Court otherwise orders) (s 33J(5)). Group members, however, need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring.(emphasis added)[19]
[18](2002) 211 CLR 1.
[19]Ibid [37]-[40].
It follows from the above that the claims of the group members are, in a practical sense, carried forward by the representative plaintiff. Once the proceeding has been issued, the Court is seized not merely of a claim by the representative plaintiff, but of the group’s claims as well. Absent an order of the Court (which necessarily must take into account the interests of the group members), the claim will proceed to trial (or settlement) where orders will be made which bind all members of the group who have not elected to opt out.[20]
[20]Ss 33Z, 33ZB.
There can be no doubt that Part 4A of the Supreme Court Act radically enlargened the scope by which representative proceedings could be brought in this State.[21] What emerges, starkly, from this analysis of the legislation in the context of these applications is that once a group proceeding is on foot, then the interests of all group members must be considered in any application which may, in some way, affect their rights.
[21]In the same way as the amendments to Rule 23 of the Federal Rules of Civil Procedure in the United States (in 1966), and the introduction of Part IVA of the Federal Court Act (in 1992) altered the landscape for group claims in these jurisdictions.
It is in this statutory context that I turn to the primary assertion of SPI which is to this effect: once it was accepted that the writ had been issued without the authority of Mr Keane, then the proceeding is a nullity and, therefore, must be dismissed. In its written submissions on this point, SPI said as follows:
(b)the firm having commenced the proceeding in the absence of any agency relationship with Mr Keane, without any instructions or authority and contrary to Mr Keane’s wishes:
(i)no proceeding was “commenced” within the meaning of s 33C of the Supreme Court Act or at all;
(ii)if any proceeding was “commenced” it was not commenced by Mr Keane;
(iii)if any proceeding was commenced by Mr Keane, it was not commenced by Mr Keane “as representing some or all” of the persons referred to in section 33C; and
(iv)the proceeding was accordingly, a nullity.
(d)The proceeding being commenced without authority and not ratified by Mr Keane before the purported substitution of Ms Matthews on 23 July 2010, that substitution was ineffective such that she is not and never has been a plaintiff.
(f)it is not possible to ratify or adopt a Part 4A proceeding commenced without authority so as to regularise it and cure the original lack of authority. The provisions of Part 4A should be construed as precluding the operation of any curative common law principles that might apply in the individual proceeding context.
Unsurprisingly in oral argument, counsel for SPI sought to shy away from expressions such as “nullity” or “voidable”. This was understandable, as the statements of principle of the High Court in Berowra Holdings Pty Ltd v Gordon[22] stand squarely in the path of this proposition advanced by SPI.
[22](2006) 225 CLR 364 “Berowra Holdings”.
Before turning to the reasoning of the Court, the history and relevant legislation in Berowra Holdings is of some significance to this application. The proceeding had, on its face, been instituted irregularly. Mr Gordon had been injured on 2 October 2001 in the course of his employment. He gave notice of injury to his employer, Berowra Holdings, under the Workers’ Compensation Act 1987 (NSW) on 12 October 2001. He then issued his common law proceeding for damages on 23 November 2001. However, there was a problem in the form of s 151C of the Workers’ Compensation Act which provided:
A person to whom compensation is payable under this Act is not entitled to commence court proceedings for damages in respect of the injury concerned against the employer liable to pay that compensation until six months have elapsed since notice of the injury was given to the employer.
On the day prior to the trial of Mr Gordon’s common law damages claim, the employer gave notice that it proposed to rely upon the non-compliance with s 151C and to argue that the proceeding was invalid or a nullity.
In Berowra Holdings, the High Court described concepts such as “nullity” and “invalidity” as misleading because they “tend to obscure the discretion between superior courts of record of general jurisdiction and courts of limited jurisdiction”.[23]
[23]Berowra Holdings [11].
The Court rejected the characterisation of the proceeding as being either a nullity or invalid, saying as follows:[24]
There also is a very real difficulty in characterising proceedings as "invalid". The institution of an action or other proceeding is the exercise by the litigant of the freedom to invoke the jurisdiction of the judicial arm of government to determine a dispute. That step engages the procedural law appurtenant to the relevant court, which in modern times is found primarily in the Rules.
Professor Jolowicz describes procedural law as creating choices or a sequence of choices in the sense that each procedural step taken by a litigant requires the other party or the court to take some action, so affecting the path which the proceedings take towards ultimate disposition. This is the case even where a procedural rule is expressed in mandatory form; if the party to whom it is addressed chooses to disregard it, the normal outcome is that a choice accrues to the other party either to do nothing or to seek an appropriate order from the court.
In the adversarial system of justice, choice rests primarily with the parties and it is generally the case that the court's power of decision or order is exercised upon the application of a party. Generally there is in law no restriction upon a person's right to start an action and to carry it to the point at which a choice is cast upon the defendant to make some response in order to avoid judgment in default. Once the procedural law has been engaged, all parties to the litigation are subject to it.
None of the above denies the possibility of a defendant denying the plaintiff's right to invoke the jurisdiction of the court, for example where the plaintiff's right is conditional upon there being an action cognisable within that jurisdiction. However, the material point is that that denial must be made within the structure of the relevantly engaged procedural law, and not outside it. Accordingly, the defendant may challenge at an interlocutory level the strength of the plaintiff's alleged case by seeking to have a plaintiff's action struck out for failure to disclose a reasonable cause of action, or dismissed as incompetent. Alternatively, the defendant may have recourse to judicial review by a superior court, challenging the right of an inferior court to adjudicate the plaintiff's claim and seeking orders to prevent the inferior court continuing to hear the claim. However, the invocation of jurisdiction ordinarily enlivens the authority of the court in question at least in the first instance to decide whether it has jurisdiction. (emphasis added and citations omitted)
[24]Berowra Holdings [13] – [16].
Berowra Holdings demonstrates that where a proceeding has been issued in contradiction of a specific statutory provision, it is nonetheless capable of being litigated and is neither void ab initio nor a nullity. On a more general level it establishes that an irregularity in the institution of a proceeding does not render the proceeding invalid. Rather, its future prosecution may be attacked by engaging the appropriate procedural measures.
The result in Berowra Holdings is also illustrative in the context of this case. The employer had raised s 151C of the Workers’ Compensation Act point at the last moment – just prior to the trial commencing. The trial Judge permitted the employer to raise the point notwithstanding its timing. The High Court held that it was unfair to Mr Gordon to have the point raised at that time (particularly as it was still open to Mr Gordon to accept the offer of compromise made by the employer – which he had endeavoured to do). Leave should not have been granted permitting the employer to amend its defence. Notwithstanding his failure to comply with what might have been thought to be a precondition to jurisdiction, the High Court held that Mr Gordon was entitled to accept the offer of compromise and have judgment entered for that amount.
Cases decided under Part IVA of the Federal Court Act are also consistent with the reasoning of the High Court. Proceedings “not properly commenced” by reason of non-compliance with the “threshold requirements of s 33C(1)” are neither a nullity nor invalid. They are, as Sackville J said in Philip Morris (Australia) Ltd v Nixon “liable to be dismissed or the applicants’ pleading struck out”. [25]
[25](2000) 170 ALR 487, [125].
The decision in Berowra Holdings also sits comfortably with the established line of authority to the effect that a proceeding issued by a solicitor without the authority of a plaintiff be regarded, to use the terminology eschewed by the High Court, as neither “void” nor a “nullity“.
The point is demonstrated by the decision of the Court of Appeal in Danish Mercantile Co Ltd & ors v Beaumont.[26] In that case, the argument put by the defendant was that:
where an action is brought without the authority of the purported plaintiff, the action is an utter and complete nullity, so that no amount of subsequent ratification can cure the defect.[27]
The Court of Appeal rejected the proposition that the action was void ab initio and concluded that notwithstanding this defect in the proceeding as originally constituted, it could be cured if ratified by the “purported plaintiff”.[28] It was a nullity only in the sense that it could be stayed on application by the defendant.
[26][1951] Ch D 680.
[27]Ibid 683.
[28]Ibid 687. This statement of principle was approved by the House of Lords in Alexander Ward & Co Ltd v Samyang Navigation Co Ltd (1975) 1 WLR 673, and by the Court of Appeal in this State in Victoria Teachers Credit Union Ltd v KPMG & anor (2000) 1 VR 654, [23].
In Presentaciones Musicales S.A. v Secunda & anor,[29] the Court of Appeal summarised the position in England:
It is well recognised law that where a solicitor starts proceedings in the name of a plaintiff – be it a company or an individual – without authority, the plaintiff may ratify the act of the solicitor and adopt the proceedings. In that event, in accordance with the ordinary law of principal and agent and the ordinary doctrine of ratification the defect in the proceedings as originally constituted is cured.[30]
[29][1994] Ch 271 – “PMSA”.
[30]Ibid 277.
Recently in this country, the principle was affirmed by Finkelstein J in Ox Operations Pty Ltd v Landmark Property Developments (Vic) Pty Ltd in liquidation:[31]
The usual course when a company is improperly made a plaintiff is to stay or dismiss the action and require the solicitor who purported to act for the company to pay the cost. The cases also show that the action though brought without authority is not a nullity in the sense that it is void ab initio without the possibility of subsequent ratification. To the contrary, it is well established that it is possible for the company to ratify the unauthorised act of the solicitor in bringing an action in its name without its actual or implied authority. And, because ratification is possible, a practice has developed that when an action is brought without authority it will not be stayed or dismissed forthwith, but the company will be permitted to convene a general meeting or a meeting of its directors to consider whether to adopt the action.[32](emphasis added)
[31][2007] FCA 1221.
[32]Ibid [2] – [3].
It follows, I suggest, that the proposition that the proceeding once issued was either void ab initio or a nullity could not be sustained unless it was demonstrated that Part 4A, in some way, quarantines a representative proceeding from the application of these general principles. This, it seems to me, requires an extraordinary leap of faith. The Workers’ Compensation Act 1987 (NSW) provided, specifically, that a person was not entitled to commence proceedings unless there was compliance with its provisions. The High Court ruled that Mr Gordon’s claim was not a nullity. Here Part 4A is silent about both invalidity and ratification – not a word is said to displace the general proposition that a representative proceeding, irregularly commenced, cannot either by way of ratification or order of the Court be maintained subsequently.
As I followed the argument of SPI, it was said that by reason of the special role taken on by the plaintiff in representing the group members (as demonstrated by a number of the provisions I have referred to), then a claim issued without authority could not be cured. This it argued flows from the Part 4A regime. Also, so the argument went, absent a specific provision permitting ratification then a representative plaintiff cannot ratify an irregularly commenced group proceeding.
Counsel for Mrs Matthews rightly, I think, characterised SPI’s argument as treating a representative proceeding as an island, immune to authority governing every other form of proceeding. Counsel for SPI was unable to direct me to any other decision to the effect that statements of principle in Berowra Holdings or, for that matter, in relation to ratification, are not of general application. Nor was he able to direct me to any authority that other forms of representative proceeding (such as that involving a litigation guardian acting for a person under a disability or a trustee acting on behalf of a beneficiary) are in some way isolated from the application of the principles I have referred to.
In Wong v Silkfield,[33] the High Court said of Part IVA of the Federal Court Act:
Like other provisions conferring jurisdiction upon or granting powers to a court, Part IVA is not to be read by making implications or imposing limitations not found in the words used; this is so even if the evident purpose of the statute is to displace generally understood procedures.[34]
[33](1999) 199 CLR 255 [11].
[34]Ibid.
There is, in my view, no warrant to draw an implication that a Part 4A proceeding irregularly commenced is therefore invalid or void from commencement; nor to conclude that the general principles relating to irregularly commenced proceedings (including that of ratification) do not apply to such a proceeding.
Finally, on this point, I should deal briefly with several of the specific arguments put in support of SPI’s contention.
Section 33ZE suspends any relevant limitation proceeding. The following was said in the written submissions of SPI:
When the Keane proceeding was issued, it was a nullity (in the sense described by the cases). It cannot therefore have been ‘commenced’ for the purpose of s 33ZE. It follows that limitation periods applicable to group members’ claims in the proceeding were not then suspended. The submission went on to contend that the ratification then had retrospective effect – i.e. by permitting the suspension period to operate.
The proposition is wrong. Once the writ was issued, as Berowra Holdings demonstrates, it was a proceeding in the Court open to subsequent attack by the Defendants. The provisions of s 33ZE were operative from the time the proceeding was commenced – unless the Court subsequently ordered otherwise.
Next, the reliance by SPI upon the principles set out by the High Court in Maxwell v Murphy[35] and subsequent cases have no application once it is accepted that the commencement of the proceeding, whilst irregular, was not, to use SPI’s categorisation “a nullity”.
[35](1957) 96 CLR 261.
Then, there was the contention that absent the existence of a principal/agent relationship between Mr Keane and Oldham Naidoo, the proceeding should be treated as a nullity. The first hurdle, as I have repeatedly said, is the decision in Berowra Holdings: the absence of the relationship rendered the proceeding open to attack by SPI as an abuse of process but it was not a “nullity”.
In any event, the existence of such a relationship is not essential to a subsequent act of ratification. In Bowstead and Reynolds On Agency[36], the following is said of ratification:
Where an act is done purportedly in the name or on behalf of another by a person who has no actual authority to do that act, the person in whose name or whose behalf the act is done may, if the third party has believed the act to be authorised, by ratifying the act, make it as valid and effectual, subject to the provisions of Article 14 to 20, as if it had been originally done by his authority, whether the person the act was an agent exceeding its authority, or as a person having no authority to act for him at all (emphasis added)
[36]Peter Watts and F.M.B. Reynolds, Bowstead and Reynolds on Agency (Sweet & Maxwell, 19th Ed. 2011) 65.
Returning to Part 4A, it seems to me that the result pressed by SPI flies in the face of the clear purpose of this Act particularly in the context of this case - which enables many persons, either injured or who have suffered the loss of a loved one, or those who have sustained damage to property, or have suffered economic loss, to be represented by one person in a group proceeding and to have their rights determined (as far as possible) in a single proceeding. To suggest that Part 4A would render nugatory a group proceeding because of a solicitor’s failure to obtain the authority of the representative plaintiff would, I think, go against the very objective of the legislation. It cannot be thought that the legislature would have intended that the rights of group members be so adversely affected, particularly say in a situation where a limitation provision could be invoked by a defendant if the proceeding was held to be a nullity from its commencement.
So to summarise; the proceeding, although commenced without the authority of Mr Keane, remains alive. The claim now brought on behalf of group members, with instructions from Mrs Matthews, is not a nullity nor is it void.
Once it is established that the proceeding is one over which the Court has jurisdiction, then the Court’s power under s 33ZF is enlivened:
In any proceeding (including an appeal) conducted under this Part the Court may, of its own motion or on application by a party, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
In Kirby v Centro Properties,[37] Finkelstein J said of this power under Part IVA of the Federal Court Act:
It is convenient to deal first with the application under s 33ZF. The section gives the court generous power to ensure that class actions are run fairly and expeditiously. In Courtney v Medtel Pty Ltd Sackville J observed that one of the reasons for the section was that the new procedures for representative proceedings would likely throw up novel problems that would require close supervision by the court. I agree. The power the section confers, while not unlimited, is certainly wide enough to permit the court to regulate how multiple class actions should be conducted.[38] (citations omitted)
[37](2008) 253 ALR 65.
[38]Ibid [26].
The issue is now crystalised – what is the appropriate order to ensure that justice is done?
The second issue – Was it possible for Mr Keane and/or Mrs Matthews to ratify the institution of the proceeding?
Much of the argument before me was devoted to whether Mr Keane or Mrs Matthews could ratify the institution and maintenance of the proceeding up to 23 July 2010. This was instructive and helpful; but ratification is not determinative. As I have just noted, the issue is, rather, whether it is in the interest of justice to make the orders sought.
In its written submissions concerning Mr Keane’s capacity to ratify the proceeding, SPI said:
Under agency principles, it is not possible for Mr Keane to ratify or adopt the commencement of the group proceeding because:
(i)of the matters referred to in sub-paragraphs(a) and (b) above; and that the proceeding was a nullity owing to the lack of authority of Mr Keane; and
(ii)he is no longer in the position of plaintiff and, accordingly, has no standing to do anything on behalf of himself qua plaintiff or on behalf of group members.
I have already rejected the proposition that the proceeding was a nullity. On the second point Mr Keane, has, by the document signed by him on 23 March 2011 ratified the institution and maintenance of the proceeding in his name until replaced by Mrs Matthews. But SPI (supported by the other Defendants) says that this ratification counts for nothing – as Mr Keane is no longer the representative plaintiff.
I do not accept this contention. No authority was cited to suggest that a person ratifying the issue of a proceeding needed to be the plaintiff at the time of ratification. Nor can I see any justification for the proposition emerging impliedly out of Part 4A.
The proceeding was issued in Mr Keane’s name. He was subsequently capable of authorising the issue of the proceeding notwithstanding he was no longer the plaintiff. I shall set out my reasoning briefly on this point and commence with article 15 of Bowstead and Reynolds on Agency which reads:
The only person who has power to ratify an act is the person in whose name or on whose behalf the act was purported to be done.[39] (emphasis added)
[39]Peter Watts and F.M.B. Reynolds, Bowstead and Reynolds an Agency (Sweet & Maxwell 19th Ed. 2011) 65.
In PMSA, the English Court of Appeal concluded that the “nominal plaintiff” could ratify a proceeding issued without its authority (in that case after the limitation period had expired) provided it was lawful to do so:
Where a writ is issued without authority, the cases show that the writ is not a nullity. For the nominal plaintiff to adopt the writ, or ratify its issue, does not require any application to the court. Accordingly, on the same general principle that justifies Pontin v Wood, the plaintiff, in the simple example of an action raising a single cause of action which has been begun by solicitors without authority, must be entitled to adopt the action notwithstanding the expiration of the limitation period applicable to that cause of action.[40] (citations omitted)
[40][1994] Ch 271, 280.
It follows that the nominal plaintiff at the time of issue, Mr Keane, may adopt the proceeding and ratify its initiation and maintenance up until the time of the substitution of Mrs Matthews.
It was argued by SPI that by implication drawn from the terms of s 33C, which provides that “a proceeding may be commenced by one or more persons as representing some or all of them”, then only if that person remains as the representative plaintiff was he or she capable of ratifying the proceeding. I disagree.
Section 33C enables the representative plaintiff to institute the proceeding and operates in tandem with s 33H to ensure that the group is sufficiently identified to satisfy the criteria for the maintenance of the claim under Part 4A. It says nothing either expressly or by implication about ratification, and, more importantly, about the principle of ratification being excluded in Part 4A proceedings.
It was also contended that because of the structure of a representative proceeding and the role of the representative plaintiff, a member of the group (which Mr Keane now is) could not subsequently ratify the institution of the representative proceeding. It was said to be a “special creature”.[41]
[41]T 46.
In my view the provisions of Part 4A have no bearing, either expressly or impliedly, on questions of ratification or lack of authority. The Part 4A regime does not prohibit the application of the general principles of ratification to a group proceeding. There is no reason to treat a group proceeding differently to any other proceeding and the matters I set out at [57]-[79] are applicable here.
There is nothing in the principles of agency which suggest that the person ratifying the unauthorised act needs to be a party to the proceeding at time of the subsequent authorisation. Rather, the enquiry is whether at that time it was lawful for the person in whose name the proceeding was issued to do so. For the reasons I have set out I think that it was.
It is sufficient (and consistent with the principles I have adverted to), that Mr Keane now says that he ratifies the institution of the proceeding notwithstanding that it was issued without his authority.
Given this conclusion, it is not necessary to determine whether Mrs Matthews had the capacity to ratify the proceeding issued in Mr Keane’s name.
The third issue – Should the proceeding be dismissed or stayed as an abuse of process – or should some other order be made recognising the abuse?
SPI contended:
Even if the proceeding is capable of ratification and that has occurred, the commencement and continuation of it was an abuse of process which has generated significant prejudice to SPI, particularly in respect of the calculation of interest in the event that any claims against it ultimately succeed. In those circumstances the proceeding ought be dismissed or permanently stayed.
I accept the contention put on behalf of each of the defendants that notwithstanding ratification by Mr Keane it is still open to the Court to dismiss the claim as an abuse of process by the exercise of the power under s 33ZF.
The principles relevant to dismissal for abuse of process were recently set out by the High Court in Jeffrey and Katauskas Pty Ltd v SST Consulting Pty Ltd[42]:
The term "abuse of process", as used in Australia today, is not limited by the categories mentioned above or those which constitute the tort. It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed. In Walton v Gardiner the majority adopted the observation in Hunter v Chief Constable of the West Midlands Police that courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be "manifestly unfair to a party to litigation ... or would otherwise bring the administration of justice into disrepute among right-thinking people". This does not mean that abuse of process is a term at large or without meaning. Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party. It is clear, however, that abuse of process extends to proceedings that are "seriously and unfairly burdensome, prejudicial or damaging" or "productive of serious and unjustified trouble and harassment".[43] (citations omitted)
[42](2009) 239 CLR 75.
[43]Ibid [28]. See also Heydon J [56]-[58].
SPI (supported by each of the other defendants) relied upon several matters as requiring dismissal.
First, the conduct of the solicitors. It was said that such conduct was repugnant to the interests of justice and it was necessary for the Court to assert its authority by dismissing the claim. There was not a skerrick of evidence that Mr Keane had ever authorised the issuing or maintenance of proceedings as the representative plaintiff.
Second, it was said that there was abundant authority for the dismissal of a claim as an abuse of process where it had been issued without authority.[44]
[44]Doulavens v Daher (2009) 253 ALR 627, 655.
Third, that a number of consent orders made in the course of the case, including the substitution of Mrs Matthews for Mr Keane, were made whilst Oldham Naidoo continued the claim knowing that Mr Keane had not authorised the institution or maintenance of the proceedings. This was inimical, it was said, to the interests of justice. Mr Adams, the responsible partner at Freehills, the solicitors for SPI, deposes, and I accept, that he would not have advised SPI to consent to these orders if he had known the true state of affairs. This again, it was said, underscores the mischief associated with Oldham Naidoo’s conduct.
Fourth, counsel for SPI made the point that there was a remedy available to Mrs Matthews and the group members for the loss of their entitlement to interest in the event that the claim was dismissed. Mrs Matthews could launch another group proceeding, this time against Oldham Naidoo on the basis of the breach of duty it owed to the members of the group occasioned by the issue of the proceeding without authority. Such a case, he implied was a lay down misere. It was, he argued, a relevant matter, just as the existence of a cause of action against a firm of solicitors is a relevant consideration in an application to extend time where the plaintiff seeks to sue the tortfeasor out of time.[45]
[45]Tsiadis v Patterson (2001) 4 VR 114, [28]; Repco Corporation Ltd v Scardamaglia [1996] 1 VR 7, 15.
Finally, that there is a real detriment to SPI, and to a lesser extent the other defendants – who were joined much later (and at a time when Mrs Matthews had been substituted as the plaintiff) in relation to any entitlement of the plaintiff and the group members to interest under the Supreme Court Act and the common law. Absent the actions of Oldham Naidoo, the proceedings, so it was argued, would not have been issued until, at least, the conclusion of the Royal Commission in July 2010. It was said that this constitutes a potential windfall for Mrs Matthews and the group, occasioned by the inappropriate conduct of the solicitors.
Mrs Matthews was, understandably, supported by Oldham Naidoo in her resistance to the abuse of process strike out application.
First, it was contended that whilst a claim brought on behalf of a single plaintiff was likely to be dismissed as an abuse, the position here was completely different, given the nature of the claim. Thousands, if not many thousands of claimants, would be affected by an order dismissing the claim. As I have already pointed out, prejudice is real in the financial sense that the plaintiff and the group members would be shut out from any entitlement to interest. This includes a period of time (approximately 10 months) when Mrs Matthews was the representative plaintiff – about which there could be no quarrel as to the solicitors’ authority to maintain the proceeding.
Second, Mr Keane had ratified the proceeding and this, consistent with the authorities I have referred to, negated an argument that it should be dismissed. Admittedly, the ratification seems to have been obtained in somewhat artificial circumstances, but it is nonetheless a ratification.
Third, Mrs Matthews has, at all times, been ready, willing and able to prosecute this proceeding. She has for the past ten months been the named representative plaintiff.
In my view, Mrs Matthews’ arguments are persuasive, at least to the extent that the proceeding should be able to continue and be maintained in her name. It is not in the interests of justice to dismiss the claim at this point of time, rather it should be regularised and orders made as sought by Mrs Matthews, with one qualification, which I will explain in a moment.
To penalise Mrs Matthews and the group members by requiring the claim to be re-issued is not in the interests of justice. The conduct of Oldham Naidoo was in no way authorised by either of the representative plaintiffs or any of the group members. Mr Keane, Mrs Matthews and the group members knew nothing of the conduct of the solicitors. Mr Oldham, for reasons which may be de determined elsewhere, engaged in a frolic of his own. The distinction between a claim on behalf of an individual plaintiff (which in some circumstances would be struck out as an abuse[46]) and a representative claim on behalf of many thousands is a stark and a decisive consideration.
[46]Multitecfbm (Asia Pacific) Pty Ltd v Seong Myeon (Chris) Hon & Anor (2008) 69 ASCR 106.
The defendants’ costs position is protected. Any costs that have been incurred unnecessarily by the defendants as a result of Oldham Naidoo’s conduct will be the subject of an order for costs in accordance with the usual practice.[47]
[47]Bray v Dye (No 2) [2010] VSC 152.
I am not attracted to SPI’s arguments relating to the exercise of the authority of the Court in the light of the abuse of process by Oldham Naidoo. SPI’s real interest is financial – that is not to say that this is not a legitimate argument, but it needs to be seen in its true light. The reality is that it is for the Court to determine what steps, if any, it should take in relation to Oldham Naidoo’s conduct. Its actions have already received considerable publicity, and many practitioners must be aware of the risks of issuing proceedings without the authority of a client, particularly in the context of proceedings under Part 4A. This Court has the power to deal with a solicitor’s misconduct as a contempt of court,[48] however, I do not propose to take this course; it seems to me to be more appropriate to refer the conduct of Mr Oldham and Oldham Naidoo in issuing and maintaining this proceeding in Mr Keane’s name to the Legal Services Commissioner.[49] I will, if necessary, make orders granting the Commissioner access to any affidavits or exhibits filed on these applications.[50]
[48]Ditford v Brown (1990) 19 NSWLR 49.
[49]Legal Profession Act 2004 (Vic), s 4.4.8.
[50]Subject to any submissions Mr Oldham or Oldham Naidoo may wish to make.
Nor do I see any real force in the argument concerning the putative right of action that Mrs Matthews and the group members may have against Oldham Naidoo. To a large degree (if not totally) this issue is resolved by my conclusion as to the entitlement of Mrs Matthews and the group members to interest which I will mention in a moment.
Mr Keane’s ratification also militates against dismissal. In any event, with or without his authorisation, I would have reached the conclusion that the proceeding should be regularised.
I see no good reason for the case to go back to square one. The defendants, when I enquired as to what would happen with the costs of this proceeding if dismissed, could not reach a common position. The proceeding, if regularised, can now move forward to a case conference, rather than go backwards to reissuing and dealing with applications concerning the adoption of previous steps taken in this proceeding.
However, I have one reservation as to unfettered regularising of the proceeding. There is considerable merit in the contention of SPI that but for the actions of Oldham Naidoo, this proceeding would not, in the normal course of events, have been issued until July 2010 when Mrs Matthews was substituted as representative plaintiff. I think that there should be a condition limiting any entitlement to interest of Mrs Matthews and the group members to the period commencing 23 July 2010 when she was appointed as the representative plaintiff. I have reached that conclusion for the following reasons.
The representative plaintiff is potentially liable for adverse costs orders, whilst the group members are immune.[51] Such orders, in mass tort claims, may be enormous. In addition the plaintiff owes a duty to the group members to conduct the case in their best interests. These considerations must weigh heavily on any person considering taking on the role and necessitate the provision of measured advice by the legal practitioners acting on his or her behalf.
[51]Section 33ZD.
This is why group proceedings, both in the Federal Court and this Court are now inevitably “lawyer driven litigation”.[52] This is a “new phenomenon”, commented upon by Finkelstein J:
This is litigation where the lawyer investigates the potential for a claim and recruits the plaintiff and often the group on whose behalf a class action is initiated. Sometimes the person who is named as the plaintiff is simply a figurehead with little at stake, and who is usually not very well informed about the theories of their case. The most common recruiting method is direct advertisement, often through the lawyer’s website on the internet. In Australia, it is becoming increasingly common for a litigation funder to cover the costs of the action. [53]
His Honour could easily have been speaking of Mr Keane, and I mean no discourtesy to Mr Keane. He was simply plucked out by Oldham Naidoo after registering on the web-site. There is no suggestion that Mr Oldham or any member of the firm researched the case or gave any thought to the obligations of the representative plaintiff. There was no discussion with Mr Keane as to his position as representative plaintiff, nor was there any advice given to him as to the risks and responsibilities associated with such a role. Initially this litigation was solely driven by Mr Oldham and Oldham Naidoo. Mr Oldham determined to be first to the registry door. The issue of the writ against incorrectly named defendants and the inclusion of an allegation of damage from a fire which occurred 200 km north of Mr Keane’s property demonstrates the haste and lack of preparation surrounding the institution of this proceeding. It was, I infer, solely motivated by Mr Oldham wanting to be first in line.
[52]Kirby v Centro Properties Ltd [2008] FCA 1505.
[53]Ibid [4].
It will be remembered that Robson J stayed the proceeding in May 2009 and excused “the plaintiffs” from filing a statement of claim. The role of the lawyers in driving the litigation is epitomised by the agreement reached in that month between Oldham Naidoo and Maurice Blackburn. The resourcing of the litigation and contribution to its preparation was to be undertaken by the two firms. A bushfire litigation strategy committee (comprising solicitors from both firms) controlled the conduct of the proceeding. There is no mention of obtaining approval from the representative plaintiff for strategic decisions made in the conduct of the litigation.
In any group proceeding there is a necessity, prior to the issue of the writ, for research of a considerable scale to be undertaken to determine whether the claim is viable and to locate a representative plaintiff who is prepared to wear that mantle with the accompanying risks and responsibilities. That is demonstrated by what was said by Mr Murphy in his initial affidavit:
Following the completion of the main hearings of the Royal Commission in approximately December 2009, I commenced active steps to investigate whether a group member with a wider range of loss-types would give instruction to be added or substituted as a representative plaintiff in the proceeding. In the period from February to May 2010, I conferred with a number of group members who had suffered both significant personal injury and serious property damage. In May 2010 I received instructions from Carol Matthews to apply to have her substituted as a representative plaintiff. Mrs Matthews signed a letter, engaging my firm jointly with Slidders, on 27 May 2010.[54]
This proceeding remains lawyer-driven – that is not in any way to tarnish or demean the claim or the rights of Mrs Matthews and the group members. Rather it is a simple fact of life when dealing with mass claims brought in representative proceedings. Their cost, both in terms of time and expense, are enormous.
[54]Affidavit of 17 March 2011 [21].
Accepting that any claim rationally prosecuted would be driven by lawyers, then I consider that any prudent solicitor contemplating the initiation of a group proceeding would have waited until at least the hearings of the Royal Commission were completed – bearing in mind that interim findings had been delivered in mid-2009. On this point, Mr Murphy said:
Over the period from 14 May to December 2009, my firm’s primary focus was on the representation my firm was providing for bushfire victims at the Royal Commission and not on this proceeding as it had been adjourned sine die. [55]
Then, as Mr Murphy’s affidavit discloses, after consideration of the evidence adduced at the Royal Commission it was necessary to identify an appropriate representative plaintiff who was prepared to take on the job.[56]
[55]Affidavit of 17 March 2011 [18].
[56]Affidavit of 17 March 2011 [18]-[24].
This approach is also consistent with what was said by senior counsel on behalf of Mrs Matthews when he appeared at the first of the directions hearings on 29 October 2010 and said as follows:
His Honour: Sorry, wait on, you issued your proceedings and sat on the writ for a year.
Counsel: We issued our proceedings and we were told by the Attorney General of this State that we’re going premature, wait for the Royal Commission.
In Mr Adams’ affidavit he referred to articles appearing in the press a week after Black Saturday:
8. On 17 February 2009:
…
(b)there appeared in The Age an article titled “Hulls hits ‘unseemly’ bushfire class action” in which the then Attorney-General for Victoria was quoted as stating “There does seem to be an unseemly rush by some lawyers to the court even before the causes of these fires have been fully investigated”; and
(c)in the same article reference was made to a press release issued by Slater and Gordon lawyers. The article stated that:
“Slater and Gordon said it was premature to be considering a class action until the findings of the royal commission on the fires were released.
‘That process will necessarily take some time and in our view it would be wasteful, distracting and pre-emptive to replicate that process with private collateral private action’, the firm said in a statement.”
I do not accept the argument put on behalf of Mrs Matthews that in some way other firms of solicitors were discouraged from instigating a group proceeding as a result of Oldham Naidoo beating them to the Registry door. True it is that there may have been an argument about abuse of process, but this would hardly have been resolved on the basis of the quickest off the mark. Quite the opposite. The Court may well have taken the view that a proceeding issued after mature reflection and consideration of the evidence given at the Royal Commission, was a far better vehicle to prosecute the claim than the one issued nine days after the fire when very little was known about the circumstances surrounding this tragedy. This again is an example of the utility of the power given under s 33ZF.
Nor is the argument that the rules of the Court inhibit the making of such an order persuasive. Counsel for Mrs Matthews relied on r 23.01(1)(c) of the Supreme Court (General Civil Procedure) Rules 2005 to argue to the effect that a proceeding should only be struck out if it was, at the time of the application, an ongoing abuse of process – otherwise it should be regularised from the date of issue. The power under s 33ZF entitles a court to look at the whole of the conduct of the proceeding and not merely its present iteration. There may well be a case where the conduct in the past has been so contumelious that a court is prepared to dismiss the proceeding notwithstanding its current status. In this case, in framing an order which best reflects the interests of justice, the whole of the conduct of the proceeding must be examined.
The egregious conduct of Oldham Naidoo will produce an unwarranted windfall to Mrs Matthews and the group members. But for its actions the proceeding would not have been issued until July 2010 once all the evidence had been assembled from the Royal Commission and an appropriate plaintiff recruited. No competent solicitor would have launched a group proceeding until that month.
It would not be in the interests of justice to permit Mrs Matthews and the group members to benefit from Oldham Naidoo’s contumelious actions. Equally, it would be contrary to the interests of justice to shut out Mrs Matthews and the group members from an entitlement to interest after her substitution as plaintiff.
I will make orders to the effect that the plaintiff and the group’s entitlement to interest (statutory or otherwise) commence on 23 July 2010 and declare that the plaintiff and the group members have no entitlement to such interest prior to that date. Orders to this effect avoid injustice and preserve the integrity of the Court’s process.
Proposed orders
Subject to hearing from counsel, I propose to make the following orders:
1.Subject to Order 2, the proceeding stand for all purposes as a proceeding regularly commenced and continued pursuant to Part 4A of the Supreme Court Act 1986 by Carol Ann Matthews:
(a)as against the first defendant – from 16 February 2009; and
(b)as against the other defendants – from the date upon which the joinder of those defendants took effect.
2.The entitlement of the plaintiff Carol Ann Matthews and/or group members to interest on damages (statutory or otherwise) commence on 23 July 2010.
3.The principals and/or directors of the incorporated legal practice Oldham Naidoo Lawyers Pty Ltd (formerly Slidders Lawyers Pty Ltd) from 16 February 2009 to the present, and each of them, be substituted for the former plaintiff Mr Leo Keane for the purpose of any order for the defendants’ costs of the proceeding incurred prior to 23 July 2010.
4.In addition I will make the following declaration:
That the plaintiff Carol Ann Matthews and the group members have no entitlement to interest on damages (statutory or otherwise) prior to 23 July 2010
– and will hear from the parties as to appropriate costs.
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