Rod Investments (Vic) Pty Ltd v Clark (No 2)
[2006] VSC 342
•20 September 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION No. 2011 of 2005
| ROD INVESTMENTS (VIC) PTY LTD | Plaintiff |
| v | |
| ADAM CLARK AND ORS | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 March 2006 | |
DATE OF JUDGMENT: | 20 September 2006 | |
CASE MAY BE CITED AS: | Rod Investments (Vic) Pty Ltd v Clark (No 2) | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 342 | |
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PRACTICE AND PROCEDURE – Group proceeding – Plaintiff’s summons seeking leave to amend group definition – Determination of remaining issues on defendants’ summonses - Multiple defendants – Whether requirement that each group member has a claim against each defendant satisfied – Whether claims sufficiently connected – Whether declaration a claim for the purpose of commencing a group proceeding - Whether proceeding should continue as a group proceeding – Whether statement of claim should be otherwise struck out - Supreme Court Act 1986, Pt 4A, s. 33C(1)(a), (b) and (c), s. 33H(2), s. 33N(1)(b), (c) and (d), and s. 33ZF.
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APPEARANCES: | Counsel | Solicitors | |
| For the Plaintiff | Dr K.P. Hanscombe SC with Mr L.W.L. Armstrong | Maurice Blackburn Cashman Pty Ltd & Goldman Partners | |
| For the first, fifth, sixth and ninth Defendants | Mr M.L. Sifris SC with Mr A.P. Trichardt | Baker & McKenzie | |
| No appearance for the second Defendant | |||
| No appearance for the fourth Defendant | |||
| For the third and seventh Defendants | Mr P. Doyle, Solicitor | Minter Ellison | |
| For the eighth Defendant | Mr D.G. Collins SC with Mr K.J.A. Lyons | Lander & Rogers | |
HIS HONOUR:
This is a group proceeding commenced pursuant to Part 4A of the Supreme Court Act 1986 (“the Act”). The proceeding was commenced in January 2005 by the filing of a writ bearing a general indorsement. There are nine defendants. The plaintiff subsequently filed a statement of claim and later, pursuant to leave granted on 5 August 2005 and by which I reserved the right of the defendants to challenge the statement of claim and the definition of the group, filed an amended statement of claim.
In October 2005 I heard applications brought by a summons filed by the first, fifth, sixth and ninth defendants and a summons filed by the eighth defendant, each summons being filed on 26 August 2005. In effect the defendants’ summonses sought orders that the proceeding not continue as a group proceeding or that the proceeding otherwise be struck out as an abuse of process.
On 18 November 2005 I published reasons for decision, ruling in the defendants’ favour[1]. I held that the proceeding should not continue as a group proceeding because the group was restricted to certain persons and companies named in the schedule to the amended statement of claim (all of whom were clients of the plaintiff’s solicitors), which restriction subverted the opt out policy inherent in Part 4A of the Act. Having determined the matter on that basis, it was unnecessary to deal with the other issues raised by the defendants’ summonses which, to summarise, were that:
(a)The requirements of s. 33C(1)(a),(b) and (c) were not satisfied.
(b)In the circumstances it was appropriate to order under s. 33N or s. 33ZF that the proceeding not continue as a group proceeding. There was also an alternative submission that the proceeding be struck out or stayed.
(c)Finally, the statement of claim should be struck out or amended pursuant to r. 23.02 on the ground that the statement of claim may prejudice, embarrass or delay the fair trial of the proceeding, the first, fifth, sixth and ninth defendants also contending that the pleading was otherwise an abuse of the process of the Court, and the eighth defendant adding that the pleading disclosed no reasonable cause of action.
[1]Rod Investments (Vic) Pty Ltd v Adam Clark [2005] VSC 449. The background facts are set out in those reasons. I repeat the matters therein only to the extent necessary.
I note that in addition to the question of the appropriateness of the group definition (on which I ruled in favour of the defendants), the submissions concentrated on points (a) and (b) above, with the point in (c) being subsidiary and not developed as it would on a pleading summons. That is, counsel focused on the threshold issues concerning the group definition and the points in (a) and (b), in which context the structure of the statement of claim was addressed to the extent necessary. I approach these reasons in the same way. The statement of claim can be considered in a pleading sense if and when it is necessary to do so.
Following my decision on 18 November 2005, I did not pronounce orders but rather stood the matter over to give the parties an opportunity to consider the reasons and their respective positions thereunder.
On 3 February 2006 the plaintiff filed a summons seeking leave pursuant to s 33K(1) of the Act to amend the group definition. The plaintiff seeks to delete the reference to the group members being only those persons named in the schedule and in lieu thereof to state that the plaintiff brings the proceeding “…on its own behalf and on behalf of all persons who: (a) by themselves, their agents or trustees, at some time during the period between 26 October 2000 and 1 September 2004 acquired an interest in shares in Media World Communications Limited (ACN 061 727 642) (formerly Werrie Gold Limited) (“MWC”); and (b) suffered, or are trustees for persons who suffered, loss and damage by or resulting from the conduct of the Defendants referred to below; (“Group Members”)”. Thus, the group would not be confined to persons being clients of the plaintiff’s solicitor, but rather would include all persons who suffered loss from the relevant conduct in the relevant period.
The summons was supported by an affidavit of the plaintiff’s solicitor, Ben Slade. Mr Slade deposed among other things that the persons named in the schedule (the current group members) had been notified of the proposed amendment to the group definition and informed that they will continue to be group members and that there was no requirement that they continue to instruct the plaintiff’s solicitors in order to continue to be group members. At the time of affirming the affidavit, none of the clients had advised that they wished to terminate the retainer agreement.
On 3 March 2006 I heard counsel on the plaintiff’s summons and the defendants’ summonses which remained on foot following the decision in November 2005.
The defendants responded to the plaintiff’s summons as follows. The first, fifth, sixth and ninth defendants (“the Clark parties”) did not oppose the proposed amendment to the group definition, but submitted that leave to amend should not be granted before determination of the remaining issues on the defendants’ summonses. The eighth defendant (“Tolly”) opposed the amendment on the basis that it was futile in that the statement of claim amended as proposed would be liable to be struck out on the ground that (1) the proposed group definition may prejudice, embarrass or delay the fair trial of the proceeding as it is vague and ambiguous; or (2) the proposed group definition does not satisfy the requirements of s 33C.
In effect, the defendants relied on the arguments raised on their August summonses, which were unnecessary to deal with in my earlier judgment. As these points were argued at length at last year’s hearing, counsel for the defendants were content to speak briefly to short written outlines which brought the situation up to date as at March 2006. Counsel relied on their previous submissions both written and oral.
Counsel for the plaintiff adopted a similar course, speaking briefly to a written outline. She too relied on her previous written and oral submissions.
The transcript from the two hearings ran to more than 170 pages, and in addition to written submissions counsel provided me with five lever arch folders of authorities. Suffice it to say that no stone was left unturned. While I have regard to all that was said by counsel, it is worth noting that the present applications are interlocutory, albeit that the defendants have raised a threshold question as to whether the proceeding is properly constituted as a group proceeding. Notwithstanding the obvious thoroughness of the parties’ preparation, in my view it is possible to state the essential arguments in short compass.
It is logical to begin with the defendants’ submissions because if they are correct in contending that the plaintiff has not complied with the threshold requirements of s 33C of the Act, the plaintiff’s application to amend must fail. Given the significant overlap between the submissions advanced on behalf of the Clark parties and those advanced on behalf of Tolly, I will deal with the defendants’ submissions as one, except where I indicate to the contrary.
Submissions
Defendants
The defendants focused on the threshold requirements of s 33C of the Act, submitting that a proceeding cannot be properly commenced as a group proceeding unless, on the face of the pleading, the requirements of s 33C are satisfied. To understand the way in which the submissions were developed, it is convenient to set out s 33C in full:
“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.
(2)A group proceeding may be commenced –
(a)whether or not the relief sought –
(i)is, or includes, equitable relief; or
(ii)consists of, or includes, damages; or
(iii)includes claims for damages that would require individual assessment; or
(iv)is the same for each person represented; and
(b)whether or not the proceeding –
(i)is concerned with separate contracts or transactions between the defendant and individual group members; or
(ii)involves separate acts or omissions of the defendant done or omitted to be done in relation to individual group members.”
The defendants submitted that, on the current state of the authorities, as a matter of construction s 33A(1)(a) requires that the plaintiff and each group member have a claim against each defendant; see Philip Morris (Australia) Ltd v Nixon[2], Hunter Valley Community Investments Pty Ltd v Bell[3], King v GIO Australia Holdings Ltd[4]. It is not necessary that the plaintiff and each group member have the same claim against each defendant. Thus, where there are multiple defendants, it is not permissible to bring a single group proceeding in circumstances where the plaintiff and some group members have a claim against one defendant while the plaintiff and some (different) group members have a claim against other defendants. To do so would be to bring multiple group proceedings within a single group proceeding. And while the authorities support the proposition that the Court might order that several group proceedings be consolidated and heard together[5], it is not possible to bring such multiple proceedings as a single group proceeding. Counsel referred to Cook v Pasminco[6] in which Hedigan J held[7] that a proceeding could not continue as a group proceeding because the first two plaintiffs claimed only against the first two defendants while the third and fourth plaintiffs claimed only against the third and fourth defendants.
[2](2000) 170 ALR 487 (“Philip Morris”). Counsel properly directed the Court to Bray v F Hoffman-La Roche Ltd (2003) 200 ALR 607 (“Bray”) where a majority of the Full Court of the Federal Court said (in obiter) (at 630-631, [122]-[130] per Carr J and at 657-659, [246]-[248] per Finkelstein J) that they considered Philip Morris was wrongly decided on this point.
[3](2001) 37 ACSR 326 at 339-340, [57]-[58] per Sackville J.
[4](2000) 100 FCR 209 at 220-221, [29]-[30] per Moore J.
[5]See for example Ryan v Great Lakes Council (1997) 78 FCR 309.
[6][2000] VSC 534.
[7]At [45].
Counsel submitted that I should, as a matter of comity, follow the line of authorities referred to above unless I thought they were plainly wrong. Even if I preferred the views expressed by Carr J and Finkelstein J in Bray[8] - to the effect that Philip Morris was wrongly decided as to the requirement that in a group proceeding the plaintiff and each group member must have a claim against each defendant - counsel for Tolly sought to distinguish the comments in Bray as being obiter and submitted that the situation considered by Finkelstein J did not involve a composite claim of separate groups being treated as one group, but rather the situation in which the one proceeding contains separate claims or separate groups which are identified as such. Counsel submitted that the present case is not one in which the plaintiff seeks to identify separate groups or sub-groups, rather it makes alternative claims on behalf of all the group members purportedly as against every defendant.
[8]See footnote 2 above.
As to whether the plaintiff and each group member has a claim against each defendant, the defendants submitted that, although in the prayer for relief the plaintiff claims on its own behalf and on behalf of all group members a declaration against all defendants, the seeking of a declaration does not satisfy the requirement that the plaintiff and each group member have a claim against each defendant.
Counsel for Tolly relied on Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd[9] where Lindgren J said that[10]:
“In my view the preferable construction of s 33C(1)(a) and 33D(1) is that a statutory locus standi of the kind given by s 80 of the TP Act[11], by itself and without more, lies outside those provisions. This view is consistent with the Second Reading Speech set out earlier which evinced an intention that Pt IVA would be used by persons who brought proceedings to prevent, or obtain relief for, loss or damage to their own interests and the interests of other group members, rather than by persons who sought only to protect public interests and whose private interests had not been specially affected at all.”
[9](1998) 84 FCR 512.
[10]At 524.
[11]The right to seek an injunction under s 80 of the Trade Practices Act 1974 (Cth).
Counsel for Tolly also referred to Bray where Branson J cited Giraffe and noted that although Lindgren J expressed a preference for the view stated above, his Honour had ultimately deferred to differing views expressed by O’Loughlin J and Branson J in two earlier cases[12]. Counsel for Tolly noted that in Bray Branson J distinguished the earlier cases of Golden Sphere and Chats House, her Honour concluding that “…persons who seek to invoke the same power in the court to make an order under the TPA in the public interest against a respondent or respondents are not ‘persons [who] have claims’ against that respondent or those respondents of the kind required by s 33C(1)”[13].
[12]Australian Competition and Consumer Commission v Golden Sphere International Inc (1998) 83 FCR 424 (“Golden Sphere”) and Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 71 FCR 250 (“Chats House”) respectively.
[13]Bray at 646, [210].
Counsel for Tolly accepted that the plaintiff’s claim for a declaration was sufficient to give it standing to be the lead plaintiff[14]. However, he submitted that if the only claim common to the plaintiff and each group member was a claim for declaratory relief, they are not claims for the purposes of s 33C(1)(a). Otherwise, the operation of the section could be avoided by every group member seeking a declaration, and that is not contemplated.
[14]Counsel for the Clark parties said in his written submission that the plaintiff did not have standing to bring a group proceeding on behalf of group members who acquired the relevant shares before the plaintiff acquired its shares. The problem was said to arise as the particulars of the plaintiff’s claim in para 71 revealed that the relevant misrepresentations were made to the plaintiff only after 17 October 2001 whereas the pleading alleged misrepresentations to other investors (group members) from early 2000. Counsel for the Clark parties did not address oral submissions on this point. I deal with the matter below.
Next, the defendants addressed the claims for damages by the plaintiff and group members. Attention focused on the plaintiff’s pleading that “some or all” of the alleged representations were a cause of the plaintiff and the group members acquiring the relevant shares in the relevant period and thereby suffering loss. While the particulars make clear that the plaintiff pleads a case in damages against each defendant (in the sense that it alleges that it suffered loss in reliance on misleading conduct engaged in by each defendant) no such particulars are given in respect of any of the group members. Similarly, counsel for Tolly submitted that the pleading was defective as to causation in respect of the Tolly report because there was no allegation that anybody except the plaintiff actually read and relied upon the report said to contain misrepresentations. Thus, in the case of all defendants, any given group member claims against “some or all” of the defendants but it is not possible to determine from the pleading whether a given group member makes a claim against any particular defendant. There is a potential for each group member to have a claim for damages against one or some but not necessarily all of the defendants. Thus, the pleading does not demonstrate that the plaintiff and each group member has a claim against each defendant. Counsel referred to Johnstone v HIH Insurance Ltd[15] in which Tamberlin J said that “The clearest indication of this deficiency, in the present proceeding, is that the group members are defined as persons who have suffered loss as a result of the misleading and deceptive conduct of any or all of the respondents … This takes the description outside the terms of s 33C(1)(a)”. Counsel submitted that that is the precise effect of the pleading in the present case.
[15][2004] FCA 190 at [36]-[41].
Counsel for Tolly submitted that even on the plaintiff’s new group definition, the pleading failed to meet the requirements of s 33C(1)(a). If the group definition included those persons who suffered loss resulting from the conduct of any defendant, there would necessarily be group members who did not have a claim against each defendant. If, on the other hand, the group definition was read such that the group members were only those persons who suffered loss resulting from the conduct of every defendant, the group would be a very narrow class, yet the members of that class were not demonstrated by the pleading as it gave no particulars for each group member.
Counsel for Tolly added that even if there is no requirement that the plaintiff and each group member have a claim against each defendant, the plaintiff has nevertheless failed to show on the pleadings that, as against each defendant, the plaintiff and at least six other group members have a claim, as is contemplated by the reference to seven or more persons in s 33C(1)(a).
As to s 33C(1)(b), the defendants submitted that the claims of the plaintiff and the group members were not in respect of, and did not arise out of, the same, similar or related circumstances. Rather, they were claims that arose in respect of disparate representations made by different defendants to different potential investors over a period of four years. Counsel recognised that although “there is some relationship between the parties and the claims” and that the Court is required to make a practical judgment, at some point along the spectrum the claims, and the relationship between the claims, of the various group members would be too tenuous and remote for the purposes of s 33C(1)(b). In the present case the link between the group members was too weak. It was not sufficient to say that the claims were all related in that they concerned the same technology. Counsel referred to Leung v American International Assurance Co (Aust) Ltd[16] where Hill J said that “… it may be the case that the circumstances in which representations are made to each group member are so diverse that it could not be said that the making of representations, even in identical terms, arose out of circumstances that were related”. Counsel submitted that this was the case here.
[16][2004] FCA 1763 at [22].
As to s 33C(1)(c), the defendants submitted that the claims of the group members did not give rise to a substantial common question of law or fact. And as there were multiple defendants, the questions must be common to the claims of the plaintiff and the group members against all the defendants; see Hunter Valley Community Investments Pty Ltd v Bell[17]. It was not satisfactory to use a very general question about technology. Rather, the case is about different representations made over time as to that technology. That is reflected in para 127 of the amended statement of claim where the ‘common questions’ listed are mainly individual matters rather than common questions. It is not apparent which of the alleged misrepresentations caused who to do what, which highlights that there is no commonality of fact and law in respect of the alleged group members. Counsel referred to Johnstone where Tamberlin J held[18] in relation to a claim involving different representations made at different points in time that, on the present state of the pleadings, it was impossible to determine whether there were substantial common questions of law or fact. His Honour said that “a person who bought shares shortly after the first media release and sold them one month later at a loss, would not have been affected by any representations that were made after they sold the shares”. Counsel for Tolly made a similar point, namely that those who had sold their shares before later representations were made could not rely on later representations as causing their loss.
[17](2001) 37 ACSR 326 at 339-340, [57]-[58] per Sackville J.
[18]At [49].
The defendants submitted that even if the plaintiff had satisfied the requirements of s 33C(1), the Court should nevertheless exercise its discretion under s 33N to order that the proceeding no longer continue as a group proceeding. A more efficacious way to proceed would be by individual proceedings by the claimants or by the group joining in a proceeding as plaintiffs under O 9. Counsel added that “…if there is a decision in one case on the quality of the technology, well one would imagine that it wouldn’t be re-litigated”. The individual issues in the case will swamp the common questions. This is a case by each plaintiff with its own peculiarities and there is not much to be gained by having any common issue determined even if it was possible to determine what the common issue was. Counsel for Tolly questioned the efficacy of the group proceeding in “determining the common questions without everyone being tied up in a much bigger case than a particular defendant might need to be, and in the circumstances where they may not be able to identify what the scope of their exposure is to the group or the quantum of any group”. Overall, the case would constitute an undue vexation of the defendants, due to the disparity between the circumstances of the group members and the investigation of “non-common issues”.
Plaintiff
Counsel for the plaintiff began her oral submissions by referring to the decision of the Full Court of the Federal Court in Bright v Femcare[19] where Finkelstein J commented[20] on what he saw as a “disturbing trend” in group proceedings, namely the bringing of numerous interlocutory applications which have the effect of delaying the litigation and bogging the parties down in what he described as “often academic or sterile arguments about pleadings, particulars, practices and procedures”. Counsel referred to the enormous body of authority in the Federal Court concerning group proceedings[21] which, she submitted, this Court can and should cut through to the quick so as not to become “similarly tied up in interlocutory knots as has begun to occur in the Federal Court”. Without overlooking the full detail of counsel’s written and oral submissions, in essence the plaintiff submitted as follows.
[19](2002) 195 ALR 574.
[20]At 607-608, [160].
[21]Representative Proceedings as they are known in the Federal Act.
First, the plaintiff contended that, applying s 33C(1)(a) as interpreted in Philip Morris, the plaintiff and every group member does have a claim against every defendant, whether they be claims for damages or claims for a declaration.
As to the claims for damages, counsel acknowledged the defendants’ complaint that the pleading does not show which representations any given group member relied on and consequently caused loss, however, she submitted that “not only does your Honour not need to know that now, but that would be contrary to the way in which the representative process is intended to work”. Counsel emphasised that the plaintiff’s claim must be fully particularised, which had been done, and it was clear from the pleading what representations the plaintiff relied on. But it is not necessary to particularise the claim of each group member at this stage of the proceeding. This is not a claim by the group members. Rather, the plaintiff brings a claim which, when determined, has the effect of raising issue estoppels in respect of the group members once the common questions are determined. The group members are not co-plaintiffs or even parties to the proceeding and there is a strong presumption against requiring them to take any positive step in the action until after the common questions are determined. The pleading of group members’ claims can persist at a high level of generality until the common questions are resolved and the need for individualised pleadings is confirmed. Sackville J observed in Philip Morris[22] that to require otherwise would deprive the representative process of much of its utility. Counsel particularly relied on the decision of Moore J in King[23] as being directly on point. She submitted that, as in that case, notwithstanding the pleading that the group members relied on “some or all” of the relevant representations, the application remained one in which claims are made by the plaintiff and each group member against each defendant.
[22]At 515-516, [132]-[136].
[23]See footnote 4 above.
Lest she be wrong on that point, counsel relied on the claims for declarations as satisfying the requirements of s 33C(1)(a) as interpreted in Philip Morris. As to this, she noted that the plaintiff, on its own behalf and on behalf of each group member, seeks a declaration against all defendants. The submission by Tolly that the claim for declaratory relief was not sufficient for the purposes of s 33C(1)(a) implied a restriction in s 33C not compelled by its terms or context. The legislature had imposed limitations on the types of claims that can be made using the Part 4A procedure, these limitations going to number, relatedness and commonality, not fine distinctions between a cause of action and an element of a prayer for relief or any public/private or legal/equitable dichotomy.
Next, in the event that the Court held that the test in Philip Morris was not satisfied either by the claims for damages or the claims for declarations, counsel submitted that the decision in Philip Morris should not be followed. Section 33C(1)(a) does not require that the plaintiff and every group member have a claim against every defendant when more than one defendant is joined to a group proceeding. While that was assumed in Philip Morris by virtue of counsel’s concession in that case, a contrary view was expressed by the majority of the Full Court of the Federal Court in Bray. Although the comments in Bray were strictly obiter, they were made after full argument and in order to remove the uncertainty created by Philip Morris. There is no authority binding on this Court that requires each group member to have a claim against each defendant. Nor, properly construed, does Part 4A require it. The approach in Philip Morris undermines the objectives of Part 4A. It compels multiplicity of proceedings where the defendants have changed over time, even if the objectionable conduct was a continuum. Rejecting Philip Morris does not mean that proceedings will become unmanageable or prohibitively expensive. There are adequate safeguards in s 33C(1)(b) and (c) and in s 33N to ensure that group proceedings remain manageable.
Focusing on the legislation itself, s 33C(1) sets out the criteria which must be met before a group proceeding can be commenced. So long as the criteria are met against each defendant whom the plaintiff sues in a representative capacity (that is, the plaintiff and at least six other persons have claims against that defendant that otherwise satisfy s 33C(1)(b) and (c))), there is no basis for implying additional restrictions on the joinder of other defendants. Here, the plaintiff makes a claim for compensation against each defendant, which claim is shared by at least six persons, even if the six other persons are not the same as against each defendant. That is sufficient.
As to s 33C(1)(b) and (c), the claims of the plaintiff and every group member are in respect of, or arise out of, the same, similar or related circumstances and involve substantial common questions of law and fact. Each claim arises out of the acquisition or retention of shares in circumstances affected by representations made with a similar object and to a similar effect by a group of defendants presumably working together. Counsel relied on Williams v FAI Home Security Pty Ltd (No 2)[24] for the proposition that there may be differences in the circumstances of the representations provided that there is a substantial common issue of law and fact.
[24][2000] FCA 726.
Counsel submitted that the trial of the plaintiff’s claim will efficiently determine, among other things, whether the representations as to the novelty and qualities of APT were misleading and deceptive and, if so, whether any defendant had reasonable grounds for making such representations. The most obvious common questions were whether APT was a new technology and whether it actually worked. These are substantial questions requiring detailed expert evidence at trial. Their resolution will have significance for every group member’s claim. To demonstrate the commonality of these questions and the fact that they arise from related circumstances, counsel submitted that if the Court concluded in the defendant’s favour that the technology did all the things that were claimed for it, that would dispose of the plaintiff’s case and also all of the other group members’ claims. Conversely, if the question as to technology was answered in favour of the plaintiff, while there would be individual issues of reliance and causation for different group members, these issues would be dealt with after the common questions had been answered in respect of the plaintiff’s claim. Counsel refuted the defendants’ suggestion that the individual issues would swamp the common questions.
Further, if the Court were to consider making an order under s 33N that the proceeding not continue as a group proceeding, regard must be had to the ways in which group members may bring their claim forward in a proceeding. Counsel submitted that if it was ordered that the case not continue as a group proceeding, to bring the case by multiple plaintiffs would attract the rule of practice to the effect that multiple plaintiffs would not be permitted separate representation. In practical effect, the result would be the same as that obtaining before my last judgment, that is, multiple plaintiffs would be represented by the same lawyers. Further, the claims were not sufficiently related to allow the plaintiffs to bring the proceeding under the joinder rules.
Decision
I will assume that Philip Morris was correctly decided. This means that, as there are multiple defendants to the present proceeding, the plaintiff and each group member must have a claim against each defendant. But it is clear from the terms of the legislation, the authorities, and indeed the concession of counsel for the defendants that it is not necessary that the plaintiff and each group member have the same claim or claims as between themselves and as against the different defendants.
Before turning to consider the issue of claims, it is necessary to make some observations about the group definition. As to the identity of the group members, I note that there are two possibilities. On the present pleadings, the group members are the 127 persons and companies listed in the schedule to the amended statement of claim. It is proposed to amend that group definition by substituting as group members “… all persons who: (a) by themselves, their agents or trustees, at some time during the period between 26 October 2000 and 1 September 2004 acquired an interest in shares in Media World Communications Limited (ACN 061 727 642) (formerly Werrie Gold Limited) (“MWC”); and (b) suffered, or are trustees for persons who suffered, loss and damage by or resulting from the conduct of the Defendants referred to below”. I can say at the outset that I reject the submission advanced by counsel for Tolly that the proposed group definition is ambiguous. In my view, the reference to “the conduct of the defendants” means conduct by any one or more of the defendants. Although as a matter of language it might be said that the word “defendants” implies that the conduct is that of all the defendants, as a matter of practical reality the plaintiff’s proposal should not be read as limiting the group members to those persons who suffered loss resulting from the conduct of each defendant. That is plainly not the plaintiff’s intention. It is apparent that the plaintiff wishes to define as group members those persons who acquired an interest in the relevant shares in the relevant period and suffered loss resulting from the conduct of any one or more of the defendants.
I now turn to consider whether the plaintiff and each group member has a claim for damages against each defendant. On the face of the amended statement of claim it is clear enough that the plaintiff itself pleads a claim in damages against every defendant, providing particulars as to its reliance on misrepresentations allegedly made by each defendant and the loss resulting thereby. As to the claims for damages made by the group members (against all defendants except Tolly), the pleading essentially does no more than allege at paragraphs 71 and 71A that “some or all” of the misrepresentations (of which there are 10 categories referred to earlier in the body of the pleading) were a cause of the group members acquiring the relevant shares (alternatively the misrepresentations were a cause of the acquisition price of the shares being artificially inflated), and by reason of these matters each group member suffered loss and damage. No particulars are provided as to the claims of the group members, it being said that particulars will be provided following the trial of common questions or otherwise as the Court may direct. It became clear during argument that the plaintiff’s solicitors did not intend to particularise individual group members’ claims at this stage of the proceeding. I interpolate that that was understandable in light of there being 127 group members, and if the plaintiff’s new group definition is accepted, the group definition will be further expanded.
Similarly, as to the claims for damages made by the group members against Tolly, the plaintiff pleads and particularises its claim as to reliance on misrepresentations and negligent statements made in the Tolly Report, and misleading statements in the 2004 prospectus, and the loss thereby suffered. As to the group members’ claims against Tolly, the pleading alleges that the relevant conduct by Tolly was a cause of each group member acquiring or retaining an interest in the relevant shares during the period from about September 2003 until September 2004, and by reason thereof each group member suffered loss. No particulars are provided in respect of the group members, it again being said that particulars will be provided following the trial of common questions or otherwise as the Court may direct.
What then is the consequence of the way in which the claims are pleaded? First, in the absence of particulars in respect of each group member’s claims, one cannot determine conclusively that any given group member (whether taken from the list of 127 persons, or the expanded group definition) will ultimately recover damages from any given defendant. For example, suppose that a group member suffered loss as a result of acquiring shares in reliance only on the so-called APT representations pleaded in para 12. Such a scenario is clearly possible, as the pleading is that each group member relied on “some or all” of the pleaded representations. Yet the representations relied on by this group member were only made by the first, fourth, fifth, sixth and ninth defendants. The group member, having not relied on any of the other representations nor having read or been aware of any of the Tolly statements, would not be able to recover damages from the second, third, seventh and eighth defendants. Indeed it would seem that the “some or all” formula has been used precisely because, until further instructions are taken and particulars provided, it will not be known which representation each individual group member relied on. On the present pleadings, the plaintiff is effectively reserving the right of each group member to claim damages from each of the defendants. Whether or not each group member is ultimately successful against each defendant is another matter entirely.
As to the claims against Tolly, the situation is analogous although the “some or all” form of words is not used. Rather, a group member’s entitlement to damages against Tolly depends on the individual group member being able to establish that it relied on the relevant statements by Tolly and thereby suffered loss in the relevant period of 2003 to 2004. In the example of the group member given above who relied only on the APT representations pleaded in para 12 and who never read or relied on any of the Tolly statements, he or she would be unable to establish that Tolly had caused his or her loss. I do not overlook the plaintiff’s alternative pleading that some or all of the misrepresentations (and the Tolly statements) caused the plaintiff and each group member to pay money for shares whose true value was nil or negligible (if the falsity of the representations had been known to potential purchasers) thus resulting in loss. But even on the basis of this “false market” pleading, if the hypothetical group member referred to above acquired (worthless) shares in 2001, he or she had already suffered loss caused by the Clark parties. There would be no entitlement to damages against Tolly, as its conduct did not occur until 2003.
It follows that, however the pleading is viewed, there is a possibility that any given group member will ultimately not be able to recover damages from every defendant. But can it be said that the plaintiff and each group member do not have a claim for damages against each defendant?
This issue was considered by Moore J in King v GIO Holdings Australia Ltd[25]. In that case the applicant commenced a representative proceeding in the Federal Court on behalf of himself and certain GIO shareholders, seeking damages and declarations against GIO, an adviser to GIO, and nine directors of GIO. In essence, the plaintiff claimed that the respondents had engaged in misleading and deceptive conduct by recommending that shareholders reject an offer by AMP to buy GIO shares during a takeover bid. The group members were defined as all persons who owned GIO shares in the relevant period and who did not accept the takeover offer by reason of the conduct “of all or any of the respondents” and who suffered loss as a consequence[26]. The statement of claim included the following statement in particulars, namely that “the Applicant and the group members relied upon one or more of those representations by one or more of the Respondents”[27]. As to this pleading Moore J said[28]:
“Several respondents pointed to this particular as indicating that the claims are not advanced on the basis that there was reliance on the representations of all respondents. The particulars contemplate that there may have been, on the part of the applicant and group members, reliance on representations of only one or some of the respondents giving rise to a claim for damages against one or some only. While this is so, it does not involve an abandonment of the claim that representations were made to the applicant and each group member and the contention on behalf of them that the making of the representations involved misleading or deceptive conduct and a breach of duty. The application remains one in which claims are made by the applicant and all the group members against each respondent.
Use of the format in the pleadings referred to in par 37 above is not, in my opinion, merely designed to establish common claims as a matter of form. The pleadings are intended to identify the claims of the applicant and members of the representative group. The respondents submitted, in various ways, that it is unlikely or improbable that the way the claims are pleaded reflect what is likely to have occurred even if the claims can be made out. That is, it is unlikely that all the 33,000 or so shareholders who have, according to the solicitors retained by the applicant, signified interest in the proceedings or all the 68,000 or so shareholders who declined to accept the offer would have appreciated that all the pleaded representations were made (which are the immediate source of alleged liability), and all the more so given that they are implied representations to be inferred, in part, from other implied representations, would have all acted on all of them in the way alleged or would all have suffered loss for the reasons alleged.
However that approach, in my view, invites speculation that is not, in the circumstances, justified. The present proceeding is, in this respect, far removed, in my opinion, from the situation considered in Philip Morris (Australia) Ltd v Nixon (supra) where the Full Court, and in particular Spender and Hill JJ, were satisfied that the case pleaded, which plainly was cast in the widest of terms as to time, the impugned conduct and the consequences of that conduct, sought to raise claims that could not satisfy the requirements of s 33C(1)(c). The position of the respondents in this proceeding is, at best, akin to the situation described by the Full Court in Femcare Ltd v Bright [2000] FCA 512 at para 93 of a respondent being able to establish only uncertainty as to whether the claims of all group members will be made out against each respondent. In this respect, the description of the representative group referred to in par 8 above serves to limit the group on whose behalf the proceeding is brought to those who suffered loss as a result of the conduct of all or any of the respondents. This description allows for the possibility, perhaps to the ultimate benefit of some respondents … that the claims might not succeed in their entirety against all respondents. However by adopting that description, the character of the claims themselves as formulated is not, in my opinion, altered. The description of the class in this way does not govern and qualify the terms on which the orders are sought in the application nor the terms on which the claims are pleaded and relief sought.” (emphasis added)
[25](2000) 100 FCR 209.
[26]At 214, [8].
[27]At 223-224, [38].
[28]At 223-224, [38]-[40].
I respectfully agree with the above observations of his Honour, which have not been criticised in any of the later cases. Further, the nature of the pleading issue raised in King is for all intents and purposes the same as the issue raised here. That is, claims for damages and declarations are made by each group member ostensibly against each defendant, although the defendants raise the possibility that the claims will not be made out against each defendant. It seems to me that central to his Honour’s reasoning is a distinction between the claims which the group members have, as evidenced on the face of the pleadings, and the relief to which individual group members may ultimately be found to be entitled. In my view the distinction is valid and flows from the terms of s 33C read in context.
As to this, I note that the authorities make clear that the word “claim” in s 33C(1)(a) should not be given a narrow, technical meaning; see Finance Sector Union of Australia v Commonwealth Bank of Australia[29], Bray[30] and King[31]. Certainly the term is broader than a cause of action or the relief to which a litigant is ultimately held to be entitled. In this case, as in King, the mere possibility (however strongly arguable) that the claim for damages of some group members may not ultimately be made out against each defendant does not alter the fact, discerned from the face of the pleading, that the plaintiff and each group member have claims for damages against each defendant. As Moore J pointed out, the defendants’ argument is based on speculation as to what may occur rather than the actual claims made on the pleadings. Further, the plaintiff’s proposed group definition confines the group members to those persons who actually suffered loss in reliance on the relevant conduct of one or more defendants.
[29](1999) 94 FCR 179 at 186.
[30]At 628-630, [110]-[121] per Carr J and at 656-657, [243]-[245] per Finkelstein J.
[31]At 222-223, [34]-[35].
I also note that in Philip Morris, Sackville J said that[32]:
“Whether proceedings at a relatively high level of generality are permissible will depend on the circumstances of the particular case and the stage it has reached. The facts material to the claims of each member of the represented group might not be necessary to ensure that the respondent adequately understands the case made on behalf of the represented class and has a fair opportunity to meet that case. This may be the position, for example, where representative proceedings are brought in order to provide a mechanism to enable one or more common issues of law or fact to be resolved in a manner that binds the respondent and all class members, rather than to determine finally the claims of each class member.”
I would respectfully agree with what his Honour said. In the present case, it is not necessary that each group member particularise its claim for damages. Such an exercise would be prohibitively expensive with 127 group members, and even more so with the expanded group definition. Moreover, subject to the plaintiff reformulating the common questions and making other amendments such as uplifting its pleading of reliance and causation from particulars to the pleading proper, the pleading is sufficient to enable the defendants to understand the case they have to meet. The present proceeding is, as counsel for the plaintiff was at pains to emphasise, the plaintiff’s case in which a common question as to technology is raised, and in respect of which the Court’s judgment will bind the group members. And, while resolution of the common question will go a long way to deciding the fate of the group members’ claims, those claims will need to be particularised individually at some later time. That is, the plaintiff’s proceeding will not determine finally the claims of each class member. In the circumstances I am satisfied that the pleading satisfies the requirements of s 33C(1)(a).
[32]At [136].
I would so conclude on the further and separate basis of the claims for declaratory relief. As to this, the prayer for relief states that the plaintiff seeks on its own behalf and on behalf of the group members declarations against each defendant. As against all defendants (except Tolly), declarations of contravention of s 995 of the Corporations Law (misleading or deceptive conduct in relation to dealing with securities), alternatively s 1041H of the Corporations Act 2001 (Cth) (misleading or deceptive conduct in relation to a financial product or financial service); contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”) (misleading or deceptive conduct in relation to financial services); contravention of s 9 of the Fair Trading Act 1999 (“the FTA”) (misleading or deceptive conduct in trade or commerce), alternatively s 11 of the FTA (misleading conduct in relation to services). And, as against all defendants (except Tolly, the third and the seventh defendants) the plaintiff seeks a declaration that the said defendants were involved in contraventions of the provisions referred to in this paragraph.
As against Tolly, the plaintiff seeks a declaration that Tolly contravened s 1041H of the Corporations Act 2001 (Cth); s 12DA of the ASIC Act; s 52 (alternatively s 53) of the Trade Practices Act 1974 (Cth) (“the TPA”) and s 9 (alternatively s 11) of the FTA.
It seems clear enough that the plaintiff and each group member may bring a claim for a declaration against Tolly. That is because s 163A of the TPA allows “a person” to institute a proceeding claiming a declaration in relation to the operation and effect of any provision of the Act (excluding certain parts which are irrelevant in the present case). In this case, a declaration of contravention of s 52 of the TPA is sought. As the High Court made clear in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd[33], a person may seek a declaration under s 163A even though they have no special interest in the subject matter of the dispute and have suffered no loss and damage by reason of the defendant’s conduct. Thus, even though it may ultimately transpire that not all group members have a claim for damages against Tolly, each group member has a claim for a declaration that Tolly has contravened s 52 of the TPA.
[33](2000) 200 CLR 591.
As to the declarations sought against the other defendants, the situation is different as those declarations are not sought under the TPA, thus s 163A does not apply. The Acts said to have been contravened (the FTA, the ASIC Act, the Corporations Law or the Corporations Act) do not contain the equivalent of s 163A of the TPA, such as would allow any person to seek a declaration of contravention. It would thus seem that ordinary principles apply as to whether, ultimately, the group members have a sufficient interest to seek a declaration. In similar fashion to the defendants’ argument about the claims for damages, 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.
For these reasons I am of the view that on the statement of claim the plaintiff and each group member have claims against each defendant, within the meaning of s 33C(1)(a).
As to whether s 33C(1)(b) and (c) are satisfied, in my view the claims of the plaintiff and all the group members are in respect of, or arise out of, the same, similar or related circumstances and give rise to a substantial common question of law or fact. I do not overlook the defendants’ submission that the alleged misrepresentations were made by nine different defendants in a variety of circumstances over a period of some four years. Nor do I overlook the likelihood that distinct issues of causation will arise in the claims of individual group members, which will require resolution on a case by case basis, if the case proceeds that far. But there is nothing remarkable about that. Part 4A specifically provides that a group proceeding may be commenced whether or not the relief sought includes claims for damages requiring individual assessment, or is the same for each person represented, and whether or not the proceeding is concerned with separate transactions between the defendant and individual group members or involves separate acts or omissions of the defendant done or omitted to be done in relation to individual group members.
In Williams v FAI Home Security Pty Ltd (No 2)[34] Goldberg J said that[35]:
“Although there may be differences between the actual terms of the statements made to the various group members that is not a bar to the proceeding continuing as a representative proceeding. So long as there is a substantial common issue of law or fact, that is to say an issue which is real or of substance, then s 33C(1)(c) of the Act is satisfied: Wong v Silkfield Pty Ltd (1999) 165 ALR 373 at 381. It is no bar to such a representative proceeding that the claim is brought in respect of representations founded in different conversations made to different members of the class. The threshold criterion is satisfied if the representations, albeit not in the same terms, are directed to substantially the same matters.”
I respectfully agree with his Honour.
[34][2000] FCA 726.
[35]At [12].
Seen in this context, I do not accept the defendants’ submission that the individual issues in the case will swamp the common questions. On the contrary, it seems to me that notwithstanding the need to re-formulate the common questions listed in para 127 of the amended statement of claim, there are substantial common questions the resolution of which will go a long way toward deciding the case one way or the other. The common questions at para 127(f) and (k) concerning whether the various representations were misleading and deceptive seem to encapsulate the subject matter of the case. Inherent in answering these questions is the determination of whether the technology was new and whether it worked, in the sense of doing that which the defendants are alleged to have said it was capable of doing. As counsel for the plaintiff pointed out, if the Court were to determine those questions in the defendants’ favour, that would effectively defeat the case of the plaintiff and each group member. Similarly, if the questions were answered in the plaintiff’s favour, that would resolve the main factual issue in the case, leaving issues of reliance and causation, and damages in individual cases. I am therefore satisfied that the requirements of s 33C(1)(b) and (c) are satisfied.
I also reject the defendants’ submission that the plaintiff does not have standing to commence a group proceeding on behalf of those group members who purchased shares in MWC before the plaintiff bought its shares. The plaintiff has pleaded and particularised its reliance on representations made by each defendant. The plaintiff plainly has a sufficient interest to commence a proceeding for damages or a declaration on its own behalf against each defendant. Thus, under s 33D(1) the plaintiff has a sufficient interest to commence a group proceeding on behalf of the group members against the defendants, provided that the other criteria in s 33C(1) are met, which I have held to be the case here.
That leaves for consideration the defendants’ alternative submission that under s 33N(1) or s 33ZF it should be ordered that the proceeding not continue as a group proceeding under Part 4A. I am quite unpersuaded by the defendants’ submissions in this respect. Indeed, they really constitute no more than argumentative assertions. I am satisfied, regarding each consideration in s 33N(1), that it is in the interests of justice that the present proceeding continue as a group proceeding under Part 4A. To be more particular, I am satisfied that it is a more efficient, effective and economic manner of determining the claims of group members than would otherwise be the case.
For these reasons also I conclude that s 33H(2) cannot avail the defendants. To be fair, it was not the centrepiece of the argument. But express reliance was placed on it in the Clark summons. In the circumstances of s 33C(1) and s 33D(1) being satisfied so also is s 33H(2) to be taken as satisfied.
Finally, while I observed at [3]-[4] above that counsel focused on the threshold issues concerning the bringing of a group proceeding, rather than focusing on the statement of claim in a pleading sense, I am of the view that there is no substance in the defendants’ argument (summarised at [3(c)] above) that the statement of claim should be struck out as an abuse of process, or as not disclosing any cause of action.
It follows from these reasons that the plaintiff should have leave to amend the group definition. I would also allow the plaintiff time to amend the statement of claim as it may be advised because there are some areas that should be tidied up. There is the need to uplift the pleading of reliance and causation from particulars to the pleading proper, the inadvertent deletion of the reference to the plaintiff in paras 116 and 124, and the plaintiff’s foreshadowed application for leave to amend the pleading to include “false market” allegations against Tolly in a new para 83A in terms analogous to para 71A. I mention those matters but there may be others. I will hear the parties as to orders for the further conduct of the case. The defendants’ summonses will be dismissed. I will hear the parties as to costs.
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