Re Cimic Group Limited
[2019] VSC 48
•19 February 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS’ LIST
S CI 2013 05159
BETWEEN
| ACN 161 046 304 PTY LTD (FORMERLY KNOWN AS MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304)) | Plaintiff |
| v | |
| CIMIC GROUP LIMITED (FORMERLY LEIGHTON HOLDINGS LIMITED (ACN 004 482 982) | Defendant |
AND BETWEEN S CI 2015 01631
| ACN 161 046 304 PTY LTD (FORMERLY KNOWN AS MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304)) | Plaintiff |
| v | |
| CIMIC GROUP LIMITED (FORMERLY LEIGHTON HOLDINGS LIMITED (ACN 004 482 982) | Defendant |
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JUDGE: | ROBSON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 November 2018 |
DATE OF JUDGMENT: | 19 February 2019 |
CASE MAY BE CITED AS: | Re CIMIC Group Limited |
MEDIUM NEUTRAL CITATION: | [2019] VSC 48 |
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CORPORATIONS – Class action – Application under s 33V of the Supreme Court Act 1986 – Application by the defendant for an order discontinuing a class action against it, pursuant to terms of settlement between the parties, in circumstances where a class action making substantially the same claims on behalf of the same group members is being pursued in the Federal Court of Australia – Application under s 33X(4) of the Supreme Court Act 1986 to dispense with giving notice of the application to discontinue the proceedings being given to group members – Applications granted.
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APPEARANCES: | Counsel | Solicitors |
in Proceeding S CI 2013 05159 | ||
| For the Plaintiff | M W L Symons | Alexander Elliott |
| For the Defendants | B C Ryde | Allens |
in Proceeding S CI 2015 01631 | ||
| For the Plaintiff | M W L Symons | Alexander Elliott |
| For the Defendant | B C Ryde | Allens |
TABLE OF CONTENTS
Introduction.......................................................................................................................... 1
The history of both proceedings....................................................................................... 1
The issue before me............................................................................................................ 4
The notice of discontinuance............................................................................................. 5
Consideration of applications........................................................................................... 7
Conclusion............................................................................................................................ 8
HIS HONOUR:
Introduction
In proceeding S CI 2015 01631, the defendant, CIMIC Group Limited (formerly Leighton Holdings Limited), (‘CIMIC’), applies for the following orders:
(a) That pursuant to s 33V of the Supreme Court Act 1986 (‘SCA’), the notice of discontinuance filed by the plaintiff ACN 161 046 304 Pty Ltd (formerly known as Melbourne City Investments Pty Ltd (ACN 161 046 304)) (‘MCI’) dated 23 July 2017 is approved.
(b) That the requirement under s 33X(4) of the SCA, that notice be given to group members of the application for approval under s 33V of the SCA of discontinuance of the proceeding, is dispensed with.
CIMIC also sought an order that MCI pay the defendant’s costs of and incidental to the proceeding, including any reserved, on a standard basis.
In proceeding S CI 2013 no 05159, CIMIC sought an order that MCI pay CIMIC’s costs of an incidental to the proceeding, including any reserved costs on an indemnity basis.
MCI and CIMIC have agreed on the orders as to costs, subject to orders 1(a) and (b) above being made. Those orders are matters that the Court must be satisfied of and cannot be subject to a consent order. Both parties submitted that the Court in its discretion should make the orders sought.
The history of both proceedings
On 4 October 2013, MCI commenced a class action on behalf of certain shareholders of CIMIC against CIMIC (formerly Leighton Holdings Limited) based on an alleged failure by CIMIC to observe the continuous disclosure obligations imposed on listed companies by the Corporations Act2001 (the first proceeding). The class of group members were those who purchased shares after the time at which it is alleged CIMIC failed to make disclosure, as it was obliged to do, and who continued to hold them to the time, when the disclosure that ought to have been made by CIMIC was made.
An application was brought by CIMIC to stay the first proceeding on the grounds that it was an abuse of process, as the primary motivating factor for the proceeding was a desire by Mr Mark Elliott, the solicitor for MCI, to earn legal fees. An application was also brought by Treasury Wines that was also the subject of class action by MCI on an alleged failure to observe the continuous disclosure obligations, for a stay of proceedings on similar grounds to those relied on by CIMIC. Both were heard by Ferguson J (as her Honour then was), at the same time. In both cases, Ferguson J declined to stay the proceedings as an abuse of process, but ordered that Mr Elliott should be restrained as acting as solicitor for MCI.[1]
[1]Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 3) [2014] VSC 340.
Treasury Wines appealed against the decision of Ferguson J, but MCI did not appeal. On 22 December 2014, the Court of Appeal allowed the appeal of Treasury Wines, holding, by majority, that the Treasury Wines proceeding should be permanently stayed as an abuse of process.[2] MCI sought special leave to appeal to the High Court of Australia against the decision of the Court of Appeal.
[2]Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd [2014] VSCA 351.
On 19 February 2015, CIMIC filed a further application that the first proceeding be stayed on the grounds that the commencement and maintenance of the action was an abuse of process, as the Court of Appeal had found with respect to Treasury Wines.
The matter came before Justice Sifris, who, on 14 April 2015, stayed the first proceeding until further order, and said that if the special leave application to the High Court against the decision of the Court of Appeal in the Treasury Wines matter was refused, he would grant a permanent stay.[3] Sifris J held that the first proceeding was an abuse of process, as the motivating factor for the proceeding was to make fees for the litigation funder, controlled by Mr Elliott.
[3]Melbourne City Investments Pty Ltd v Leighton Holdings Limited [2015[ VSC 119.
On 14 April 2015, within hours of Sifris J’s decision, MCI commenced a second proceeding against CIMIC (S CI 2015 01631) (the second proceeding) making the same allegations as in the first proceeding, but this time using a solicitor other than Mr Elliott.
On 11 May 2015, MCI sought leave to appeal Justice Sifris’ decision.
On 15 May 2015, the High Court of Australia refused MCI’s application for special leave to appeal from the decision of the Court of Appeal in Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd.[4]
[4][2014] VSCA 351.
On 7 September 2015, the Court of Appeal refused Melbourne City Investments’ application for leave to appeal against the decision of Sifris J.[5] In relation to the earlier Court of Appeal decision on the appeal of Treasury Wine Estates Ltd,[6] the Court said:[7]
We see no error in the conclusion of the majority that the proceeding was brought for an improper purpose, to use them as a means of generating income for Mr Elliott rather than to recover compensation. It is one thing to commence a proceeding for the purpose of obtaining substantive relief, and in the knowledge that if one is successful then costs will likely follow the event. It is another to have commenced a proceeding for the predominant purpose of simply generating income for a legal practitioner in circumstances where the value of any loss meant that it was unlikely that the proceeding had been commenced for the purpose of recovering compensation. We agree with the majority in Treasury Wine that commencing a proceeding, in the circumstances we have described, for the predominant purpose of generating income for a legal practitioner, was and is an abuse of process.
[5]Melbourne City Investments Pty Ltd v Leighton Holdings Limited [2015] VSCA 235.
[6]Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd [2014] VSCA 351.
[7]Melbourne City Investments Pty Ltd v Leighton Holdings Limited [2015] VSCA 235, [45].
On 18 November 2015, CIMIC applied to have the second proceeding stayed as an abuse of process.
Eventually, on 23 July 2017, CIMIC and MCI agreed to settle the second proceeding on the following terms:
(a) The second proceeding brought by MCI be dismissed;
(b) MCI pay 75 per cent of CIMIC’s standard costs in the second proceeding; and
(c) MCI receives a reduction to the value of $50,000 on the costs CIMIC is entitled to recover from it in the first proceeding.
Pursuant to the terms of settlement, on 24 July 2017, MCI filed a notice of discontinuance in the second proceeding.
On 17 November 2017, CIMIC informed MCI that it required Court approval of the discontinuance against CIMC, pursuant to s 33V of the SCA.
On 1 June 2018, CIMIC filed the current applications in the second proceedings.
The issue before me
During the hearing of the applications before me, the parties announced that in both summonses they had reached agreement on costs. On the summons in the first application matter, the parties agreed that the application should be dismissed with no orders as to costs. In the summons in the second application matter, the parties agree that there should be no order as to costs. Both orders are subject to me making the orders 1(a) and (b) referred to above.
On the summons in the second proceeding, CIMIC seeks the following orders:
1Pursuant to s 33V of the Supreme Court Act 1986 the notice of discontinuance filed by the plaintiff dated 23 July 2017 is approved.
2The requirement under s 33X(4) of the Supreme Court Act 1986 that notice be given to group members of the application for approval under s 33V of the Supreme Court Act of the discontinuance is dispensed with.
Orders as to costs were also sought, which have been resolved.
The notice of discontinuance
Section 33V of the SCA provides:
(1)A group proceeding may not be settled or discontinued without the approval of the Court.
(2)If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.
However, s 33X(4) provides:
Unless the Court is satisfied that it is just to do so, an application under s 33V must not be determined unless notice has been given to group members.
Both parties submitted that I should dispense with notice to members and approve the discontinuance of the second proceeding. There were several factors relied upon by the parties. First, the evidence presented established that a similar application to that made by MCI against CIMIC has been commenced in the Federal Court of Australia in the Sydney registry, in which Maurice Blackburn are the solicitors and the parties are Inabu Pty Ltd v CIMIC (No ACD93/2016). If one seeks access to the internet site that supplies information in respect of the second application, the reader is redirected automatically to the website maintained by Maurice Blackburn in relation to its proceedings, Inabu v CIMIC.
On 25 June 2018, Justice Jagot of the Federal Court of Australia made orders in Inabu v CIMIC as to pleadings and opt out orders. Jagot J also made class closure and claim preclusion orders in the matter.
Under the s 33T of the SCA, a group member may apply to be substituted as the plaintiff if ‘it appears to the Court that the plaintiff is not able to adequately represent the interests of the group members.’ It was submitted that, theoretically, that right is open to the group members in the second proceeding on the application to discontinue the second proceeding. However, it was submitted the group members would suffer no prejudice, if they were not given notice of the application to discontinue, as they are the members of the group in the Inabu v CIMIC group proceeding, and it is extremely unlikely that a group member would seek to be substituted in the second proceeding in view of the fact that a similar proceeding is already on foot in the Federal Court being pursued by well-known solicitors.
Further, it was submitted that a group member could opt out of the Inabu v CIMIC group proceeding if they had wanted, to under the opt-out notice, and commence a proceeding on their own behalf.
How Inabu v CIMIC was permitted to proceed in the Federal Court of Australia when virtually the same application was on foot in the Supreme Court of Victoria is not for me to explore.
The parties submitted that the cost of notifying the group members would be prohibitive and the financial cost would far outweigh any perceived benefit in giving notice of the application to discontinue to the group members. The cost to notify the same group of people in Inabu v CIMIC would be in excess of $80,000. This is mainly the fee to be paid to Computershare (the share-registry manager).
In Laine v Thiess Pty Ltd; Beetson v Sunwater Limited,[8] Justice John Dixon of this Court considered a similar application to discontinue proceedings. The proceedings had not been served and evidence was led that the proceedings had no merit. It was submitted that the group members would not be prejudiced by their discontinuance. His Honour took into account that it was unlikely that group members would be advised to contemplate group proceedings for the same causes of action against the same defendants arising out of the same facts, having regard to the investigations into the lack of merit in the causes of action.
[8][2016] VSC 689 (‘Laine v Thiess’).
It was submitted that there would be no res judicata or issue estoppel from discontinuance, as no matter had been subject to judicial determination.
Dixon J, after referring to the decision of Rares J in Wotton v State of Queensland,[9] approached the question of approval of discontinuance of a class action from the perspective of how the discontinuance would affect the interests of group members. Dixon J said that approach is plainly what was required in the case before him.
[9][2009] FCA 758 (‘Wotton v Qld’).
In the case before me, as another overlapping class action is on foot and being actively pursued, I do not consider the interest of the group members would be materially prejudiced if the proceedings were discontinued.
On the question of dispensing with notice to members, in Matthews v SPI Electricity and SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 16),[10] Dixon J referred to a number of considerations which he considered were valid reasons to grant dispensation. First, his Honour said that the writs remain unserved, and to date no costs had been incurred by the defendant or group members. Secondly, his Honour said that the proceedings had no real prospect of success in terms of liability and quantum. His Honour said that the intention to discontinue had been reported in the media. Finally, the judge said that any further publication and dissemination of notices to group members notifying them of the intention to discontinue would incur unnecessary and potentially substantial costs and be of little benefit and delay the disposition of the proceedings.
[10][2013] VSC 74 (‘Matthews v SPI’).
Consideration of applications
CIMIC, the applicant for the orders sought in this case, concedes that it is unusual for the defendant to seek the orders sought, but the application is supported by the plaintiff, Melbourne City Investments, and subject to Court approval the second proceeding has been settled.
Each case must be dealt with on its merits. The overriding factors in this case are, first, that the proceedings to be discontinued have not progressed beyond being instituted. Further, and most importantly, the cause of action is currently being pursued in a class action in the Federal Court for the benefit of the same group members.
As mentioned above, a purpose of giving notice is to inform group members that the plaintiff wishes to discontinue the proceeding to give a group member or members time and the opportunity to apply to take over the group proceedings.[11] In view of the overlapping Federal Court proceedings, it is most unlikely that any group member would so apply and seek to oppose the settlement of the second proceeding, or seek to continue the second proceeding. Further, the plaintiff supports the application by the defendant that the second proceeding should be discontinued. As noted above, under the terms of settlement between the plaintiff and the defendant, the plaintiff has agreed that the second proceeding should be dismissed.
[11]Section 33T of the SCA.
I do not consider any useful purpose would be achieved by giving notice of the discontinuance to group members. I believe that, in the circumstances, the cost of giving notice to the group members would be an unnecessary burden to place on the plaintiffs.
Conclusion
I am satisfied that it is just to approve the discontinuance of the second proceeding, without notice being given to group members as provided in s 33X(4) of the SCA. Further, for the reason discussed, I approve MCI discontinuing the second proceeding under s 33V of the SCA.
I so order.
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