Melbourne City Investments Pty Ltd v WorleyParsons Limited
[2014] VSC 303
•27 June 2014
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 6536
| MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304) | Plaintiff |
| v | |
| WORLEYPARSONS LIMITED (ACN 096 090 158) | Defendant |
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JUDGE: | Ferguson J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 May 2014 |
DATE OF RULING: | 27 June 2014 |
CASE MAY BE CITED AS: | Melbourne City Investments Pty Ltd v WorleyParsons Limited |
MEDIUM NEUTRAL CITATION: | [2014] VSC 303 |
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PRACTICE AND PROCEDURE – Representative proceeding brought by shareholder – Alleged misleading or deceptive conduct on part of Defendant company – Plaintiff shareholder purchased shares before alleged conduct occurred – Declaratory relief sought pursuant to Court’s inherent jurisdiction that conduct in breach of s 1041H Corporations Act 2001 (Cth) and that group members (shareholders who purchased shares after date(s) of alleged misleading and deceptive conduct) entitled to compensation and interest – No claim for compensation by Plaintiff – Whether Plaintiff has real interest in bringing claim to ensure future compliance with law and because shares held by Plaintiff may suffer diminution in value – Whether nature of group proceeding and public interest affects approach to standing – Plaintiff having no real interest in prosecuting claim – No foreseeable consequences for parties – Plaintiff lacks standing to bring the proceeding.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N J O’Bryan SC with Mr M W L Symons | Mark Elliott |
| For the Defendant | Ms W A Harris QC with Mr R G Craig | Herbert Smith Freehills |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Does MCI have standing to bring the claim?............................................................................... 2
Other grounds of opposition......................................................................................................... 15
Conclusion......................................................................................................................................... 16
HER HONOUR:
Introduction
Melbourne City Investments Pty Ltd (‘MCI’) holds 28 ordinary fully paid shares in WorleyParsons Limited which it acquired for a little under $700 on 1 November 2012. MCI has commenced this group proceeding[1] against WorleyParsons and seeks leave to file a further amended statement of claim. The application is opposed by WorleyParsons.
[1]Pursuant to pt 4A of the Supreme Court Act 1986 (Vic).
MCI seeks to bring the proceeding on its own behalf and on behalf of all persons who acquired ordinary shares in WorleyParsons on or after 14 August 2013 and who were, at the commencement of trading on 20 November 2013, holders of any of those shares. In broad terms, MCI alleges that WorleyParsons published forecasts of increased earnings on four occasions between August and mid‑October 2013 which it had no reasonable grounds for making and which were misleading or deceptive in breach of s 1041H of the Corporations Act 2001 (Cth). MCI alleges that WorleyParsons corrected its earnings forecast on 20 November 2013. MCI further alleges that before 20 November 2013, the market price for WorleyParsons’ securities was substantially greater than their true value or the market price that would have prevailed but for WorleyParsons’ alleged misleading or deceptive conduct. MCI claims that the fall in the price of WorleyParsons’ securities after 20 November 2013 was a result of WorleyParsons’ conduct. MCI alleges that group members have suffered loss and are entitled to compensation pursuant to ss 1041I and 1325 of the Corporations Act. MCI does not itself make any claim for compensation. Rather, it seeks declarations that WorleyParsons has contravened s 1041H and that the group members are entitled to compensation and interest.
WorleyParsons opposes the application for leave to amend on the grounds that MCI has no standing to bring a claim of the kind purportedly pleaded, the pleading fails to disclose any cause of action and is otherwise embarrassing, and that it fails to comply with the requirements of pt 4A of the Supreme Court Act 1986 (Vic) for a group proceeding.
For the reasons which follow, I agree that MCI does not have standing. Leave to file the proposed further amended statement of claim should not be granted.
Does MCI have standing to bring the claim?
As I have noted above, MCI only seeks declaratory relief. It purchased its shares before any of the alleged misleading conduct occurred. It does not allege that it has suffered any loss as a result of WorleyParsons’ conduct.
A person has standing to enforce a public right provided that either some private right of that person has also been infringed or that the person has a real interest in doing so.[2] The Court will not grant relief if a declaration will not produce any foreseeable consequences for the parties.[3] If the person is in no different position to any other member of the public, then the person lacks standing to enforce the public right.[4] The issue of standing is the same whether declaratory or injunctive relief is sought.[5] In Australian Conservation Foundation Inc v Commonwealth,[6] Gibbs J explained what constitutes a real interest in the following way:
…an interest, for present purposes, does not mean a mere intellectual or emotional concern. A person is not interested within the meaning of the rule, unless he is likely to gain some advantage, other than the satisfaction of righting a wrong, upholding a principle or winning a contest, if his action succeeds or to suffer some disadvantage, other than a sense of grievance or a debt for costs, if his action fails. A belief, however strongly felt, that the law generally, or a particular law, should be observed, or that conduct of a particular kind should be prevented, does not suffice to give its possessor locus standi. If that were not so, the rule requiring special interest would be meaningless. Any plaintiff who felt strongly enough to bring an action could maintain it.[7]
[2]Boyce v Paddington Borough Council [1903] 1 Ch 109, 114 cited with approval by Gibbs J in Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493, 526–527; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 582.
[3]Ibid. Declaratory relief will also not be granted if the question is purely hypothetical: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 582.
[4]Gouriet v Union of Post Office Workers [1978] AC 435 cited with approval by Gibbs J in Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493, 527.
[5]Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493, 526.
[6](1980) 146 CLR 493.
[7]Ibid 530–531. See also 539 (per Stephens J) and 548 (per Mason J).
Here, MCI relies on the Court’s inherent jurisdiction to make the declarations sought. It points to s 36 of the Supreme Court Act 1986 (Vic) which provides that a proceeding is not open to objection on the ground that a merely declaratory judgment is sought, and the Court may make binding declarations of right without granting consequential relief. It is nevertheless interesting that the Corporations Act does not give a person in MCI’s position standing to seek a declaration of contravention of s 1041H. Rather, only ASIC is given standing by s 1101B(1)(a)(i). Whilst that section does not operate as an exclusive code,[8] it does give a good indication as to who the legislature expected would seek such relief. Moreover, if a person does not have standing as a result of s 1101B(1), then the person must establish standing on the usual basis as articulated in the authorities to which I have referred above.
[8]Re Idylic Solutions Pty Ltd; Australian Securities and Investments Commission v Hobbs (2013) 93 ACSR 421.
MCI contends that the group members have standing as it is alleged that they have actually suffered loss as a result of WorleyParsons’ alleged contraventions of s 1041H. So much may be accepted for the purposes of the present application, but that does not remove the need for MCI, as the lead plaintiff, to have standing.
In this regard, MCI submitted that it has a right personally to seek the declaration as to breach of s 1041H and that it has a right to seek the declaration as to entitlement to compensation on behalf of group members. MCI observed that in Direct Factory Outlets Pty Ltd v Westfield Management Ltd,[9] Cooper J held that there need not be a cause of action before the power to grant declaratory relief may be exercised.[10] MCI also referred to the statement of French J (as his Honour then was) in IMF (Australia) Ltd v Sons of Gwalia Ltd,[11] that the ‘fact that declaratory relief relates to the lawfulness of future conduct does not place it beyond the reach of judicial power’.[12] But those observations do not detract from the requirement that the plaintiff seeking such relief must have standing. Indeed, in Direct Factory Outlets Pty Ltd v Westfield Management Ltd,[13] the court referred to the real interest and foreseeable consequences necessary to establish standing for the grant of declaratory relief[14] and held that the applicant in the case before it had a sufficient interest to bring the proceedings.[15] In IMF (Australia) Ltd v Sons of Gwalia Ltd,[16] IMF sought a declaration that it could lawfully do what it intended to do in using information on the Sons of Gwalia share register to approach shareholders to join in a representative proceeding. It clearly had a real interest in that regard.
[9]Direct Factory Outlets Pty Ltd v Westfield Management Ltd (2003) 132 FCR 428.
[10]Ibid 433 [14].
[11](2004) 211 ALR 231.
[12]Ibid 243 [43].
[13](2003) 132 FCR 428.
[14]Ainsworth v Criminal Justice Commission (1991) 175 CLR 564, 582.
[15]Direct Factory Outlets Pty Ltd v Westfield Management Ltd (2003) 132 FCR 428, 433–434 [17], [20]–[21].
[16](2004) 211 ALR 231.
MCI accepted that it must have a real interest if it is to bring the action. It contended that it does for a number of reasons. One basis for standing that it suggested is that it may have suffered the loss of a chance to make an alternative investment having held shares at the time of the alleged contravening conduct. Leaving aside other potential difficulties with this submission, the argument is flawed because nowhere in the pleading is any loss of opportunity claim made.
With greater emphasis, MCI submitted that the question of real interest, so far as it is concerned, is intimately linked with the foreseeable consequences of the relief sought. It argued that there are foreseeable consequences associated with:
(a)the diminution of the value of its shares;
(b)a desire to avoid WorleyParsons engaging in further contraventions of s 1041H due to the possibility of further diminution in the value of its shareholding; and
(c)a public interest in deterring WorleyParsons from further contravening the section.
MCI elaborated on the foreseeable consequences that it says flow from the declarations sought. First, group members who have suffered loss may proceed to seek to recover their loss from WorleyParsons. If there is an award of damages to be satisfied by WorleyParsons, MCI will suffer a reflective loss as a member, which it says is of real consequence to it.
MCI argued that because it and the group members are not outsiders, it is not prevented from bringing the action because of s 124(2) of the Corporations Act. That section provides that a company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it. Speaking about a predecessor of this section, McPherson J (with whom Lee and McKenzie JJ agreed) observed in ANZ Executors & Trustee Company Limited v Qintex Australia Limited[17] that the section was concerned to maintain the validity of corporate dealings with outsiders but did not free the directors or shareholders from ensuring that rules of the company are given effect to by them.[18] So MCI says, this supports its proposition that it has standing as the declaration of contravention of s 1041H that it seeks is intended for the protection of the plaintiff and group members, and to allow group members to recover the loss that they have suffered as a consequence of the alleged breaches. It submitted that there may, in the future, be a need for MCI or a group member to bring a derivative action.
[17][1991] 2 Qd R 360.
[18]Ibid 371.
I accept that s 124(2) does not prevent the claim that MCI seeks to bring. But in my view, nor does it sanction it. It does not give MCI standing. Section 124(2) does not have anything to do with a claim by a shareholder against the company. Rather, it brings out the distinction between the company’s capacity to perform an act and the abuse of powers by directors. The improper conduct of directors may be redressed through an action brought by the company or a derivative action brought in the name of the company. There is no claim against the directors in the present proceeding. It cannot be that the potential for such a claim at a later time, dependent, as it must be, on a myriad of unknown factors (including the outcome of the claim that MCI purports to bring) is sufficient to found standing in MCI to bring the current proceeding. The point is brought home by the decision in Australian Agricultural Co v Oatmont Pty Ltd[19] (‘AACO v Oatmont’). In that case, Oatmont brought proceedings against Australian Agricultural Co (‘AACO’) seeking a declaration to the effect that AACO was in breach of s 38A of the Crown Lands Act 1979 (NT). Oatmont was a shareholder of AACO. Oatmont sought to bring the action on its own behalf and on behalf of all the remaining shareholders. The action was not a derivative action. Rather, Oatmont contended that, as a shareholder, it had a private right to prevent corporate misuse of power where that misuse was illegal conduct of the kind proscribed by statute and which attracts penalties. Mildren J (with whom Asche CJ and Martin J agreed) held that in some cases, a shareholder may have standing to seek a declaration that proposed activity is unlawful. His Honour gave as an example the situation where there is a derivative claim against the directors which the shareholder would bring in the name of the company. In that circumstance, his Honour was of the view that a shareholder might have a sufficient interest to bring an action for a declaration.[20] However, his Honour held that a shareholder may not bring a claim against the company simply because the company has suffered damage which results in a diminution in the value of the shares. The diminution in share value is simply reflective of the loss suffered by the company. His Honour stated:
In my opinion it would be oppressive to permit an individual shareholder, where personal rights were not affected, except as to a possible diminution in the value of his shares, and who is unable to bring a derivative action, to seek declaratory relief when the lawfulness of the conduct complained of is neither deliberate nor reckless, nor for that matter, negligent.[21]
[19](1992) 8 ACSR 255.
[20]Ibid 266.
[21]Ibid 268.
MCI submitted that the present case falls within the derivative action exception to which Mildren J referred. It says that if the group members seek to recover their loss from WorleyParsons, the company may seek to sue its directors and, if it did not, MCI and group members could each seek to bring a derivative proceeding. It seems to me that that is not the situation that Mildren J had in contemplation. Rather, what his Honour seemed to have in mind was the situation where there was on foot a derivative claim against the directors and, as an adjunct, the shareholder might have standing to seek a declaration. It is not necessary for me to determine whether a shareholder in those circumstances would have standing to seek a declaration, for that is not the position here. As I have said, there is no claim against the directors nor any application by MCI, or anyone else for that matter, to bring a derivative action against the directors. The proceeding is only brought in respect of WorleyParsons.
MCI also argued that AACO v Oatmont[22] should be distinguished, as it was not a representative action and did not involve the public interest considerations that are engaged in proceedings such as the present case. MCI argued that that fact, coupled with the fact that the decision was one from 1992, before the modern jurisprudence on representative actions developed in Australia, renders the decision of no assistance to the Court in determining the current application. As will be seen from what follows below, I do not accept that there has been a shift away from the standing requirements for declaratory relief in the group proceeding authorities of more recent times. I can see no reason to depart from the principle espoused in AACO v Oatmont[23] that where a shareholder could not bring a derivative action, a possible diminution in share price alone does not give the shareholder standing to restrain the company from breaching the law.
[22](1992) 8 ACSR 255.
[23]Ibid.
Indeed in my opinion, it cannot be that a person can acquire standing to seek a declaration because the very action that it wishes to bring, if successful, will be a step in potentially causing it to suffer a diminution in the value of its shares. To some extent in oral submissions, Senior Counsel for MCI resiled from the proposition and suggested that the Court could not be confident that there would be a diminution in the value of MCI’s shares.
Senior Counsel placed significantly more reliance upon what MCI contends are the other foreseeable consequences that flow from the declarations sought as set out in (b) and (c) above — specific and general deterrence. As a shareholder, MCI contends that it has a continuing interest in WorleyParsons complying with the provisions of the Corporations Act. Thus, MCI says, it is in its interest that WorleyParsons does not mislead or deceive shareholders and prospective shareholders in the future. If WorleyParsons engaged in misleading or deceptive conduct in the future, MCI contends that it would necessarily affect it as a shareholder and may also affect the world at large. It pointed to the purpose of s 1041H being to avoid the occurrence of misleading conduct with emphasis on the protection of consumers. So, MCI says, a foreseeable consequence of the declarations it seeks is to provide general deterrence to other large listed companies from breaching s 1041H. According to MCI, this public interest is relevant to the question of standing. It submitted that the importance of the prohibition in the Corporations Act on misleading and deceptive conduct is akin to the public importance of the continuous disclosure regime that operates under the Corporations Act.[24]MCI relied on CSL Australia Pty Ltd v Minister for Infrastructure and Transport[25] (‘CSL case’). The case concerned the operation of parts of the Coastal Trading (Revitalising Australian Shipping) Act 2012 (Cth) (‘Coastal Trading Act’). Under that Act, a decision had been made by the relevant Minister’s delegate to vary a temporary licence for voyages that had been granted to Rio Tinto Shipping Pty Ltd. CSL Australia Pty Ltd, as the general licence holder, was interested in that decision. CSL contended that the decision by the Minister’s delegate was erroneous. Robertson J determined that CSL had been denied procedural fairness and made declarations that this denial had affected four voyages, two of which had been completed by the time of his Honour’s decision. In reaching this conclusion, Robertson J decided matters concerning the construction of the Coastal Trading Act and the appropriate approach to be taken by the Minister in considering applications for the grant of temporary licences. His Honour set aside the temporary licence that the Minister had granted so far as it affected the two voyages that had not been undertaken. The matter was remitted to the Minister to consider whether a temporary licence ought be granted in respect of those voyages. Because of the way in which Robertson J had construed two sections of the Coastal Trading Act, the Minister’s delegate concluded on the remit that there were two mandatory considerations to be taken into account in assessing whether the licence should be varied. The Minister granted a temporary licence in respect of one of the voyages. CSL could have sought a merits review of this decision in the Administrative Appeals Tribunal (‘AAT’). Instead, it sought judicial review of that decision in the Federal Court. By the time of the hearing, the voyage had been undertaken. Katzmann J refused to grant relief, holding that a merits review by the AAT gave CSL an adequate remedy. CSL brought an appeal from the decision of Robertson J seeking declarations in wider terms than those made by his Honour and sought leave to appeal from the decision of Katzmann J. It was uncontroversial that there would be further applications for licences under the Coastal Trading Act involving CSL, Rio Tinto and the Minister. In addition, the Coastal Trading Act was new legislation introducing a new regulatory regime for Australian coastal trading.
[24]See the observations of Bell AJA in National Australia Bank Ltd v Pathway Investments Pty Ltd (2012) 265 FLR 247, 260 [61] as to the importance of the continuous disclosure obligation.
[25][2010] FCAFC 10.
Among other things, CSL contended that there was no point in seeking a merits review of the Minister’s decision because the AAT would construe the Coastal Trading Act in accordance with the construction of the legislation implicit in the reasoning of Robertson J, which CSL argued was erroneous. Consequently, CSL submitted that a merits review would only perpetuate the error until corrected on appeal from the decision of the AAT (either by a single Federal Court judge not following Robertson J, or by the Full Federal Court on appeal from a single judge). Allsop CJ (with whom Mansfield J agreed) accepted this argument in the particular circumstances before him. The Chief Justice found that had a merits review been pursued, it would in all likelihood have needed to be corrected by application to the court for judicial review in connection with the proper construction of the Coastal Trading Act. His Honour observed that that course was already available with the appeal from Robertson J being on foot. In separate reasons, Rares J also accepted CSL’s argument. His Honour observed that the Coastal Trading Act implemented an important new regulatory regime for Australian coastal trading and that if the Minister had proceeded in a legally incorrect way it was likely that that error would be repeated in subsequent decisions. The question of law as to the proper construction of the statute could not have been resolved by the AAT. In addition, a merits review by the AAT ‘could not have resulted in a resolution of the broader disputes between CSL and both the Minister and Rio Tinto while the legal issues remained unresolved. Nor could a review in the Tribunal have assisted CSL, Rio Tinto, the Minister and importantly, the nation’s commercial and shipping industries in reaching a legally binding decision of a Court as to how the new legislation operated in a real controversy’.[26] In that context his Honour concluded:
It cannot be said that a declaratory order made by the Full Court will produce no foreseeable consequences for the parties. Rather, such an order will decide a real legal controversy. There is nothing abstract or hypothetical in determining whether the Minister, by his delegate, varied Rio Tinto’s temporary licence in accordance with the Act. CSL has a real interest in raising the questions to which a declaration will go, namely the proper administration of the Minister’s power to grant and vary temporary licences. And, there is a considerable public interest in the observance of the application of a lawful method of consideration of applications for such grants in accordance with the new procedure created by the Parliament in the Act.[27]
[26]Ibid [328].
[27]Ibid [332] (citations omitted).
I do not regard this decision as one assisting MCI. When the totality of the reasoning of Allsop CJ and Rares J is considered, it is clear that CSL had an obvious personal interest in seeking the declaration that it did. At its heart, the declaration sought went to the proper construction of the legislation in question. CSL had an obvious real interest in that construction, given that it was a general licence holder and that it had and would in the future be affected by decisions made by the Minister in respect of the grant of temporary licences if the erroneous construction of the statute were to be perpetuated. True it is that there was also a public interest in clarification of the proper construction of the Coastal Trading Act as important new legislation, but I do not regard the reasoning of the Full Federal Court as suggesting that that alone would have given CSL standing.
By contrast, in the present case the proper construction of the relevant provisions of the Corporations Act is not the focus of determination of the claim. Rather, the declarations sought are as to whether the particular conduct alleged contravened s 1041H and whether the group members are entitled to compensation. MCI has no comparable real interest to that which CSL had in the CSL case.
In any event, there is no allegation that WorleyParsons is likely to breach the relevant statutory provisions in the future. In the absence of some threatened conduct in breach of the legislation that would justify the grant of injunctive relief by a person with standing, the Court would not grant declaratory relief at the behest of a private citizen for the purpose of some kind of specific or general deterrence. Whilst MCI sought to elevate its position as the lead plaintiff well above the ordinary member of the public, there is no basis for doing so. It is not a regulator. It is in no different position than an ordinary member of the community with a desire that large publicly listed companies comply with the law.
MCI nevertheless submitted that in a representative proceeding, a different approach is taken as to whether or not the lead plaintiff has standing to seek declaratory relief. Senior Counsel for MCI submitted that the only answer that is given to the common questions in a representative proceeding is articulated in the form of a declaration. It relied on the following passage from Hall v Australian Finance Direct Ltd (No 3):[28]
There is no provision in part 4A which expressly prohibits a plaintiff from advancing a claim in a group proceeding which is not personally maintainable by him. On the contrary, the general nature of part 4A supports the plaintiff’s, rather than [the defendant’s] argument.
To validly commence a group proceeding, s 33C requires that the claims of seven or more people against the same person are in respect of, or arise out of, the same, similar or related circumstances. There must be at least one substantial common question of law or fact. A representative party is not required to have the same claim as every other group member.[29]
[28][2007] VSC 366.
[29]Ibid [14]–[15].
Whilst I accept that the answer to common questions in a representative proceeding most likely will take the form of declarations, the proceeding is nonetheless also a vehicle for the lead plaintiff’s claim for loss. Here, MCI does not make any claim for loss. It only seeks declaratory relief. The passage from Hall’s case that I have set out above, does not assist MCI. In contrast to the present case, in Hall’s case, there was no issue about whether the lead plaintiff had a claim at all. Rather, the question was whether it was necessary for him to have the same claim as each group member. The passage set out above must be read in that context.
MCI also relied on a decision of Hansen J in Rod Investments (Vic) Pty Ltd v Clark (No. 2).[30]There were multiple defendants. The plaintiff pleaded a claim in damages against each of them, providing particulars as to its reliance on misrepresentations allegedly made by each defendant and the resultant loss. His Honour held that the plaintiff was entitled to seek declaratory relief in relation to misleading or deceptive conduct under the then s 52 of the Trade Practices Act 1974 (Cth) (‘TPA’). Relevantly, s 163A of the TPA provided that a person may institute a proceeding claiming a declaration in relation to the operation and effect of any provision of the TPA. The effect of that provision was to do away with the usual requirement to have a special interest in the subject matter of the dispute before declaratory relief could be sought.[31] Declarations were also sought in respect of alleged misleading and deceptive conduct in contravention of the Corporations Act. There is no equivalent of s 163A of the TPA in the Corporations Act. His Honour observed that in relation to those declarations, it would be necessary for a special interest to be established. His Honour said:
…it can be said that in the absence of any particulars as to how any given group member was affected by the alleged contraventions of any particular defendant, it is not certain that any given group member has a special interest such as would entitle it to a declaration that the defendants have contravened any of the Acts, except the TPA where s 163A can be invoked. But again, that is to draw an impermissible distinction between the claims as made on the face of the pleadings and the possibility that those claims may not come to fruition as against each defendant. I am therefore satisfied that each group member has a claim for a declaration against each defendant.[32]
[30][2006] VSC 342.
[31]Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591.
[32]Rod Investments (Vic) Pty Ltd v Clark (No. 2)[2006] VSC 342 [50].
In essence, the pleading did enough to show that the group members had an interest because it was pleaded that the plaintiff and the group members had claims against all defendants. Whether they would succeed in that regard was a separate matter to be determined at a different time. The decision is distinguishable from the present case. Here, there is no claim pleaded for damages by MCI (as there was by the plaintiff in Rod Investments which had alleged that it had relied on misrepresentations and suffered loss), nor is there anything else pleaded that would go to show that MCI has a real interest in seeking the declaratory relief that it does.
In the representative proceeding context, MCI referred to the recent decision of Philip McMurdo J in Kinsella v Gold Coast City Council.[33]The Kinsellas own a house in an estate which is near a waste disposal facility operated by the Gold Coast City Council. The Kinsellas claim that the Council’s operation of the facility resulted in the escape of noxious materials from its site causing them damage by diminishing the value of their property. They claim damages and seek to bring the proceeding on their own behalf and on behalf of other owners of houses in the estate. They seek declarations, damages, interest and costs. On a strike‑out application, the court held that it was empowered to make the declarations sought, ‘notwithstanding that they would leave open other questions for determination before the existence or otherwise of the alleged causes of action could be decided’.[34] His Honour held that the relief claimed would be beneficial to the Kinsellas and the represented owners.[35] I do not think that this case assists MCI. Unlike the present case, the Kinsellas were in the same position as the class members — they had allegedly suffered damage.
[33][2014] QSC 65.
[34]Ibid [78].
[35]Ibid.
It seems to me that, at the very least, it would be odd for a plaintiff who has no personal claim for loss to bring a group proceeding, unless it could show that it has some other real interest in seeking declaratory relief. Where only declaratory relief is sought, I can see no reason to depart from the usual principles that apply to determine whether the lead plaintiff has standing simply because the proceeding is a representative one.
MCI submitted that there are a number of authorities which support the proposition that a shareholder may seek declaratory relief. However, those authorities do not assist MCI. They relied on one or other particular legislative provision that extended the ambit of those who may seek relief,[36] or the plaintiff had an identified real interest in contradistinction to a shareholder claiming to suffer a loss by diminution in the value of its shares alone,[37] or the claim was brought by a regulator which stands in a different position to a private citizen.[38]
[36]Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 (power under s 163A(1)(a) of the Trade Practices Act 1974 (Cth) for ‘a person’ to institute a proceeding seeking the making of a declaration in relation to the operation or effect of any provision of the Act); Allen v Atalay (1993) 11 ACSR 753 (on a strike‑out application held that it is arguable that in a claim against directors, a creditor is a person whose interests were affected by alleged breach of their duties — s 1324 of the then Corporations Law gave the court power to make orders on the application of ‘a person whose interests have been, are or would be affected by conduct’); Oates v Hawkins [2010] NSWSC 491 (breach of obligations as directors and relying on the operation of s 1324 Corporations Act for relief); Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No. 2) (1993) 41 FCR 89 (power under s 21 of the Federal Court Act of Australia Act 1976 (Cth) to make a declaration in proceedings for injunctive relief under the then s 80 of the Trade Practices Act 1975 (Cth) which provided that the court may grant an injunction on the application of the Minister, the Trade Practices Commission or ‘any other person’ whether or not the person intends to engage again in conduct again and whether or not there is an imminent danger of substantial damage to any person.)
[37]Allen v Atalay (1993) 11 ACSR 753 (claim by landlord creditor against directors who had caused company to sell its assets at an undervalue in contravention of their obligations as directors under the Corporations Law); Dhami v Martin (2010) 79 ACSR 121 (three directors and shareholders, declaration sought by one of them as to validity of change in directorship of company), Oates v Hawkins [2010] NSWSC 491 (claim by shareholder against directors for breach of their obligations and seeking restoration of moneys to company); Aboriginal Benefit Fund Pty Ltd v Batemans Bay Local Aboriginal Land Council (1997) 41 NSWLR 494, 501–502 (plaintiffs’ existing businesses threatened by unlawful and subsidised competition from the defendants, such that the plaintiffs would ‘be affected to a substantially greater degree, and in a significantly different manner, to the rest of the public’).
[38]Australian Securities and Investments Commission v Axis International Management Pty Ltd (2009) 73 ACSR 207 (application by the corporate regulator, ASIC, for declaration of contravention of the Corporations Act); Director of Consumer Affairs Victoria v DW International Trading Pty Ltd [2010] VSC 515 (Director of Consumer Affairs Victoria seeking declarations of contravention of the Fair Trading Act 1999 (Vic) and non‑compliance with the relevant regulations).
MCI submitted that although the discussion in the cases it relied on occurred in the context of a specific statutory power given to make a declaration, nevertheless the judges discussed the inherent jurisdiction of the Court and also discussed it in the context of standing in cases of the nature of the present case. I do not read the cases that way. Rather, it seems to me that the discussion about the inherent jurisdiction to grant declaratory relief was to contrast what is required for standing in that context against the broader statutory standing that has been bestowed under some legislation for a wider class of plaintiffs to seek relief.[39]
[39]Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591, 611–612 [46]–[47], 613 [51]–[52] (per Gaudron J); Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No. 2) (1993) 41 FCR 89, 96 (per Sheppard J), 110–111 (per Hill J); Allen v Atalay (1993) 11 ACSR 753, 757; Oates v Hawkins [2010] NSWSC 491 [64]–[69].
It follows from what I have said that I am not satisfied that MCI has standing to bring the proceeding.
Other grounds of opposition
As I noted at the outset of these reasons, WorleyParsons opposed the application for leave to amend on grounds other than a lack of standing in MCI. Broadly, those grounds might best be described as pleading points and representative action points.
Having concluded that MCI does not have standing, I do not think it appropriate nor do I propose to deal with those other grounds. In this regard, I have taken into account that MCI has no basis for being before the Court in this proceeding based on the allegations that it makes. At one point in the hearing, Senior Counsel for MCI recognised that it was not a group member (as the group is currently defined) and suggested that the group member definition should be widened to include all shareholders in WorleyParsons. Even if this were done, it would not rectify the problems that I have identified as to MCI’s lack of standing. The lack of standing is not simply a matter of the definition of the group members. Rather, it is a fundamental flaw that cannot be rectified if the claim is for declaratory relief in exercise of the inherent jurisdiction of the Court in respect of alleged misleading and deceptive conduct in contravention of the Corporations Act. In addition, in deciding not to deal with the other grounds of opposition to the application, I am mindful that there are a number of other representative proceedings before the Court, many of which have been brought by MCI and which have some similarities to the current proceeding. In my view, in the circumstances, it is preferable that I do not express a view about the other grounds of opposition.
Conclusion
MCI does not have standing to bring the proceeding. It has no real interest which would give it standing to do so.
I will hear from the parties as to the orders that should be made and as to costs.
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