National Mutual Property Service (Australia) Pty Ltd v Citibank Savings Ltd (No 2)
[1996] FCA 59
•9 FEBRUARY 1996
LIMITED DISTRIBUTION
CATCHWORDS
PRACTICE AND PROCEDURE - inconvenient joinder of causes of action - applicants seeking to recover contribution or indemnity in respect of some $19,000,000 which they paid to 289 investors in settlement of claims made by them in respect of their investments in a "Negative Gearing Package" - hearing of the 289 causes of action likely to take some years - some common questions of fact and law - other matters specific to individual investors, such as representations made to them and reliance - questions of case management - no question of principle.
NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LIMITED & ORS v CITIBANK SAVINGS LIMITED & ORS (No 2)
No NG 765 of 1994
Lindgren J
Sydney
9 February 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 765 of 1994
GENERAL DIVISION )
BETWEEN:
NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LIMITED & ORS
Applicant
AND:
CITIBANK SAVINGS LIMITED & ORS
Respondent
CORAM:Lindgren J
PLACE:Sydney
DATE:9 February 1996
MINUTE OF ORDERS
THE COURT ORDERS:
THAT the three motions be stood over to 1 March 1996 at 9.30 am for the making of orders in accordance with Reasons for Judgment (No 2) of Lindgren J dated 9 February 1996.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 765 of 1994
GENERAL DIVISION )
BETWEEN:
NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LIMITED & ORS
Applicant
AND:
CITIBANK SAVINGS LIMITED & ORS
Respondent
CORAM:Lindgren J
PLACE:Sydney
DATE:9 February 1996
REASONS FOR JUDGMENT (No 2)
HIS HONOUR: In this matter I delivered Reasons for Judgment on 1 November 1995 (132 ALR 514) ("the earlier Judgment"), dealing with a motion of the first respondent, ("Citibank"), a motion of the second respondent ("LKFM") and the third respondent ("Kelly") (together "the Kelly interests"), and a motion of the applicants. The following Reasons for Judgment assume that the earlier Judgment has been read.
The earlier judgment dealt with pleading points. As a result of it, a further amended statement of claim was filed on 11 December 1995. An important aspect of the further amended statement of claim is that the fourth applicants have ceased to be parties.
The present Reasons for Judgment address (a) the remaining aspects of the motions by the Kelly interests for an order that the application and supporting statement of claim be struck out or dismissed pursuant to O 6 r 6 of the Federal Court Rules, and (b) the remaining part of the applicants' motion which sought an order that there be heard, separate from and prior to any other issue in the proceedings, the claims of five particular fourth applicants.
The fourth applicants, having ceased to be parties, are called "Investors" in the further amended statement of claim. I will also refer to them as "Investors" (in some cases, an "Investor" is a "couple"). Although this was not made explicit, the applicants' motion was treated as having become a motion by the remaining applicants ("the National Mutual companies") for an order that their causes of action against the respondents in respect of the same five Investors be heard and determined separately from and prior to any of the other causes of action in the proceedings.
Order 6 r 6 deals with the inconvenient joinder of parties or of causes of action. It provides as follows:
"Where any joiner of parties or of causes of action may complicate or delay trial of the proceeding or is otherwise inconvenient, the Court may order separate trials or make such other order as the Court thinks fit."
What is thrown up for decision in the proceedings as they are
now constituted is whether there is an inconvenient joinder of causes of action, and if not, what directions should be given for the further conduct of the proceedings.
Under the further amended statement of claim, the National Mutual companies seek equitable contribution or contribution under the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) from Citibank, from the Kelly interests, and from the fourth respondent, Dennis Jones & Company Pty Ltd ("DJC") and the fifth respondent, Dennis Jones ("Jones") (together "the Jones interests"), in respect of moneys which the National Mutual companies paid to numerous persons who invested in the "Negative Gearing Package" referred to in the pleading.
I referred to the schedules to the amended statement of claim in the earlier Judgment. As reconstituted, there are 144 investors named in schedule 1 of the further amended statement of claim, comprising the 78 Jones investors named in schedule 2 and the 66 Kelly investors named in schedule 4. Those numbers and the following ones may be compared with those referred to in the earlier Judgment.
Of the 78 Jones investors, 58 represent cases which include a pleading of a cause of action under the Securities Industry Code (see schedule 3). Of the 66 Kelly investors, 48 represent cases which include a pleading of a cause of action under the Securities Industry Code (see schedule 5). Of the total of 144 investors, 89 are Citibank investors (see
schedule 6).
A calculation shows that the amounts which the National Mutual companies seek to recover by way of contribution or indemnity, representing the amounts which they paid out to the Investors, is $10,462,397.24. The National Mutual companies claim to have settled with a further 145 investors, and that the aggregate paid out in respect of all 289 Investors exceeds $19,000,000. After the National Mutual companies further amend the pleading to refer to these further 145 Investors, they will be seeking contribution or indemnity from the respondents in respect of this amount.
The National Mutual companies apparently wish to join as additional respondents, the American Home Insurance Company which is said to have been the insurer of the Jones interests, 11 individuals who were engaged as sub-agents by the Kelly interests and seven individuals who were engaged as sub-agents by the Jones interests.
All of this is by way of background and indicates that, looked at as a whole, the claim for contribution is a very substantial one in terms of money and of the number of causes of action involved.
It is in relation to the number of causes of action that the remaining issues raised by the motions arise. After the addition of the further 145 claims, there will be 289 "cases"
within the proceeding.
It would have been possible, no doubt, for the National Mutual companies to have launched 289 actions in various courts, including, in New south Wales, the Local Court, the District Court and the Supreme Court, and in Victoria, the Magistrates' Court, the County Court and the Supreme Court. The Kelly interests submit that this is the course which should have been followed, and that it is an inconvenient joinder for 289 causes of action to be brought in one proceeding in this Court.
The Kelly interests point to some of the difficulties which confront the Court in grappling with such a large number of claims in the one proceeding. First, of course, there is the sheer magnitude of the litigation. On any reckoning it would take a very long while to hear. Some estimates have been suggested. It suffices to say that if the proceeding were to run the full distance and all 289 claims were to be contested fully, the hearing would probably take some years. It is also put that if some of the cases were to be dealt with as "pilot cases", a judge who decided one of them might make findings of credit and so become disqualified from hearing any further case involving the same witnesses so that the full complement of Federal Court judges might soon become disqualified.
It is interesting to note that if this consideration is valid, it affects, albeit less dramatically, even the various New South Wales and Victorian Courts to which I have referred. I have not performed the calculation called for, but it is conceivable that, even using all of the reasonably available "judicial" power of the various courts to which I have referred, if one were to proceed on the assumption that no judge or magistrate could hear more than one of the 289 cases because of the possibility of his or her becoming disqualified by the making of findings on credit, the judicial officers available might not be able to hear all 289 cases.
The cases involve Investors in more than one State. There is a factual and legal overlap between many, if not all, of the 289 causes of action. In other respects they differ. There are common factual and legal issues relating to agency but a distinctiveness, albeit some similarity, in relation for example, to the representations alleged to have been made to the respective investors. Of course, reliance is individual to each of the 289 Investors.
I have come to the view that although the task is a daunting one if one were simply to go no further than to contemplate 289 causes of action to be heard seriatim in the one proceeding, the Court should grapple with the problem. It is a more efficient use of resources that the National Mutual companies' claims should be dealt with in one proceeding by this Court than that they should be heard and determined in several other courts.
The choice available is between forcing the National Mutual companies to commence numerous actions with the additional administrative inconvenience, filings, pleadings, affidavits, fees and other costs which that course would impose, and the processing of all claims in a single lengthy hearing. The former course also opens up the possibility of inconsistent approaches and results and a multitude of appeals. Looking at "the legal system" as a whole, and putting to one side any particular interest of this Court and of individual members of it, I think that this Court should take the problem on board.
Where a commercial entity settles with a large number of individuals and where there is at least a substantial factual and legal overlap in the entity's various claims for contribution or indemnity, there seems to me to be a case for at least permitting, if not encouraging, the entity to bring one proceeding for contribution. Although cases on joinder of parties are not identical with those on joinder of causes of action, reference may be made, for example, to the approach taken by Wilcox J in Bishop v Bridgelands Securities Limited (1990) 25 FCR 311, a case of the former kind.
The National Mutual companies submit that if they were now to commence 289 proceedings in the other courts mentioned, some of those courts would lack jurisdiction to determine the claims for contribution or some of them and there would be a limitation defence problem. In view of the conclusion which I have reached on other grounds, I need not explore those submissions to conclusion. I note, however, that they seem to have substance, and to the extent that they do, they lend support to that conclusion.
In relation to the applicants' motion for an order that five pilot cases be determined first, I am not persuaded at this stage that this course should be embraced at this stage. There is the possibility, as Mr Hutley of counsel for the Kelly interests submits, that one or more judges may become disqualified. But perhaps more importantly, it would be necessary for the evidence common to more than one of the Investors to be given every time an individual "case" was dealt with. One advantage of simply commencing at the beginning and working through the 289 cases to the end is that the evidence which is common to them will need to be given only once.
The view which I have just expressed need not be treated as final. Ways of managing the litigation efficiently can be reviewed once any additional respondents have been joined, and, for that matter, from time to time thereafter.
In the result, I will dismiss the Kelly interests' motion in so far as it seeks a striking out or dismissal pursuant to O 6 r 6, and dismiss the applicants' motion in so far as it seeks an order for the separate hearing and determination of five "pilot cases".
There are several aspects of the case which the parties should now explore. It may be that they can agree upon directions as to joinder of the additional respondents and as to the filing of defences. A question has been raised in the course of argument whether evidence should be filed before a defence is filed and I understand that this matter may be contentious. Another question is that of the costs of the motions.
It is desirable that the proceedings be stood over to enable the parties to confer with a view to my making as many directions as possible by consent. Accordingly, by consent, I stand the three motions over to 1 March 1996 at 9.30 am for the making of orders in accordance with the foregoing reasons.
I certify that this and the preceding 8 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:19 February 1996
Heard: 31 January 1996
Place: Sydney
Decision: 9 February 1996
Appearances: Mr J Gleeson of counsel instructed by Cutler Hughes & Harris appeared for the applicant.
Mr S Epstein of counsel instructed by Holmes and Bevan appeared for the first respondent.
Mr N C Hutley with Mr I Jackman of counsel instructed by Phillips Fox appeared for the second and third respondents.
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