Timbercorp Finance Pty Ltd (In Liq) v Collins
[2016] VSCA 128
•1 June 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0104
| TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190) | Applicant |
| v | |
| DOUGLAS JAMES COLLINS | First Respondent |
| JANET ANN COLLINS | Second Respondent |
S APCI 2015 0105
| TIMBERCORP FINANCE PTY LTD (IN LIQUIDATION) (ACN 054 581 190) | Applicant |
| v | |
| JOHN CHARLES TOMES | Respondent |
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| JUDGES: | WARREN CJ, SANTAMARIA and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 30 November and 1 December 2015 |
| DATE OF JUDGMENT: | 1 June 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 128 |
| JUDGMENT APPEALED FROM: | [2015] VSC 461 (Robson J) |
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PRACTICE AND PROCEDURE – Part 4A of the Supreme Court Act 1986 – Managed investment schemes – Collapse of schemes – Group proceeding on behalf of investors in schemes – Defendants include lender to investors – Dismissal of group proceeding – Opt out provisions – Subsequent recovery proceedings by lender against group members – Group members had not opted out of group proceeding – Group members raised individual claims and defences in recovery proceedings – Whether failure to opt out of group proceeding precluded group members from raising individual claims and defences in recovery proceedings.
STATUTORY INTERPRETATION – Group proceedings – s 33Q of the Supreme Court Act 1986 – Whether group members entitled to participate in group proceeding – Whether group members can raise questions not common to group proceedings – Whether failure to raise questions not common in group proceeding precludes group members from raising those questions in subsequent proceedings.
PRACTICE AND PROCEDURE – Group proceedings – Anshun estoppel – Test – Whether unreasonable of group members not to have raised individual claims and defences during group proceeding – Whether group members estopped from raising individual claims and defences in subsequent proceedings by reason of failure to raise individual claims and defences in the group proceeding – Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
PRACTICE AND PROCEDURE – Estoppel – Anshun estoppel – Scope of principle – Whether Anshun estoppel may preclude a person who was neither a party nor a privy of a party in an earlier case – Whether unreasonable not to have raised cause of action in earlier proceeding – Relevant factors – Content of opt out notice in group proceedings – Whether respondents estopped from raising matters in subsequent proceedings.
PRACTICE AND PROCEDURE – Estoppel – Anshun estoppel – Privity of interest – Parties and their privies – Whether group members privies of plaintiff in initial group proceeding – Whether plaintiff in group proceeding would be precluded from raising claims and defences of individual group members in subsequent proceedings.
PRACTICE AND PROCEDURE – Group proceedings – Abuse of process – Failure of plaintiff or group members to raise individual claims in group proceeding – Whether raising individual claims and defences by group members in subsequent proceedings is oppressive or brings administration of justice into disrepute.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant in S APCI 2015 104 and S APCI 2015 105 | Mr A C Archibald QC with Mr D J Batt QC and Dr C O H Parkinson | Mills Oakley Lawyers |
| For the Respondents in S APCI 2015 104 | Mr M D Wyles QC with Mr D J Fahey | Macpherson + Kelley |
| For the Respondent in S APCI 2015 105 | Mr A Herskope with Ms L H Kirwan and Mr M D Tehan | JBT Lawyers |
Table of contents
Introduction
Factual background
The Collins loan
The Tomes loans
Origins of the group proceeding
Collins and Tomes become clients of M+K
The initial proceedings in the Supreme Court
The development of the group proceeding
Commencement of the group proceeding
Reports to class members
The first opt out notice
Circular of 29 October 2010
Collins and Tomes receive the opt out notice
Revised opt out notice
The nature of the group proceeding
Hearing and dismissal of the group proceeding
Common questions and answers
Timbercorp Finance issues recovery proceedings
Claim against Mr and Mrs Collins
Amended defence of Mr and Mrs Collins to recovery proceedings
Claim against Mr Tomes
Amended defence of Mr Tomes to recovery proceedings
Preliminary question in Collins and Tomes proceedings
Differences between allegations in the group proceeding and those in the defences in the recovery proceedings
Some relevant provisions in pt 4A of the Act
Judgment of the primary judge
Proposed grounds of appeal
Analysis
Part 4A of the Act and the rights of group members
Anshun estoppel
The relevant public interests
The test
Application to non-parties
Privies and Tomlinson
Submissions of Timbercorp Finance
Are group members estopped simply by not opting out?
The proper construction of s 33Q etc
Are plaintiffs in a group proceeding confined to claims in which they have an interest?
Was the relief sought in the group proceeding substantially the same as that underlying the individual defences?
Conclusion as to Anshun estoppel
Were the group members privies of the plaintiff?
Abuse of process
Conclusion
WARREN CJ
SANTAMARIA JA
McLEISH JA:
Introduction
The applicant, Timbercorp Finance Pty Ltd (in liquidation) (‘Timbercorp Finance’), was a member of the Timbercorp Group of companies. Timbercorp Ltd was the parent company. The other main member of the group was Timbercorp Securities Ltd (in liquidation) (‘Timbercorp Securities’), which was the responsible entity for relevant Timbercorp investment schemes.
Between 1992 and its collapse in 2009, the Timbercorp Group invested more than $2 billion in agribusiness projects on behalf of some 18,500 investors. After the introduction of pt 5C.1 of what was then the Corporations Law (Cth) in 1998,[1] these investments were developed pursuant to managed investment schemes. Many investors, including the respondents in the present proceedings, Douglas James Collins and Janet Ann Collins, and John Charles Tomes, borrowed moneys from Timbercorp Finance to finance their investments in the schemes.
[1]Managed Investments Act 1998 (Cth).
On 23 April 2009, Mark Anthony Korda and Craig Peter Shepard, partners of KordaMentha, were appointed administrators of the Timbercorp Group companies.
On 29 June 2009, the Timbercorp Group’s creditors resolved to wind up the companies, and the administrators became liquidators. At the time the Timbercorp Group collapsed, Timbercorp Finance’s loan book had over 14,500 outstanding loans to over 7500 borrowers totalling $477.8 million, including loans to Mr and Mrs Collins and Mr Tomes.
In the six months following the date on which administrators were appointed to the Timbercorp Group companies:
(a) borrowers under approximately 8470 Timbercorp loans (totalling approximately $243 million) failed to meet their loan repayment obligations;
(b) Timbercorp Finance notified the borrowers for each of those loans that they had failed to meet repayment obligations and that they were in default of their loan obligations; and
(c) Timbercorp Finance issued final demand notices to borrowers in respect of approximately 1480 of those loans.
In June 2009, Timbercorp Finance commenced proceedings against 20 defaulting borrowers to recover loan moneys.
On 27 October 2009, a proceeding was commenced pursuant to pt 4A of the Supreme Court Act 1986 (‘the Act’) by Allen Rodney Woodcroft-Brown as plaintiff on his own behalf and on behalf of group members as defined (‘the group proceeding’). The definition of ‘group members’ was complex but, in substance, it extended to those persons who had an interest in a managed investment scheme in which Timbercorp Securities was the responsible entity. The defendants to the group proceeding were Timbercorp Securities, Timbercorp Finance, and various directors of those companies. The statement of claim in that proceeding was amended several times. In large part, the allegations in the statement of claim related to deficiencies in the various product disclosure statements issued in respect of the schemes. Eventually, the plaintiff proceeded to judgment on his sixth further amended statement of claim, which was filed on 14 April 2011. On 1 September 2011, Judd J delivered judgment in the group proceeding.[2] On 27 October 2011, he made final orders dismissing the group proceeding.
[2]Woodcroft-Brown v Timbercorp Securities Ltd [2011] VSC 427.
On 10 October 2013, the Court of Appeal dismissed an appeal from the judgment and orders made by Judd J.[3] An application for special leave to appeal to the High Court was refused.[4]
[3]Woodcroft-Brown v Timbercorp Securities Ltd [2013] VSCA 284 (Warren CJ, Buchanan JA and Macaulay AJA).
[4]Woodcroft-Brown v Timbercorp Securities Ltd [2014] HCATrans 85.
Subsequently, Timbercorp Finance commenced separate proceedings against Mr and Mrs Collins and Mr Tomes in which it sought recovery of outstanding principal and interest on the moneys that it had lent them (‘the recovery proceedings’). Neither Mr and Mrs Collins nor Mr Tomes had opted out of the group proceeding. However, each sought to defend their respective recovery proceeding on various bases including (a) that no loan had been advanced to them and that they did not acquire an interest in the project relevant to them (in the case of Mr and Mrs Collins) and (b) that it had been represented that, in the event of default under a loan agreement, Timbercorp Finance’s only recourse would be against the investment in the scheme (in the case of Mr Tomes).
In response, Timbercorp Finance pleaded that each respondent was precluded from raising the pleaded defences by reason of the fact that they were a group member in the group proceeding. In effect, Timbercorp Finance contended that each of the respondents is subject to the estoppel described in Port of Melbourne Authority v Anshun Pty Ltd[5] (‘Anshun estoppel’). In addition, it contended that each of their defences should be stayed as an abuse of process. In the event, the Court (Judd J) ordered that the question whether the respondents were precluded from raising any and, if so, what defences pleaded by them by reason of their participation as group members in the group proceeding be determined as a preliminary question pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2005.[6] A hearing on this preliminary question was held before a judge of the Trial Division.
[5](1981) 147 CLR 589 (‘Anshun’). Timbercorp Finance did not submit that the respondents were precluded by res judicata or issue estoppel.
[6]On 30 October 2015, the Court (Judd J) made orders in the Collins proceedings granting Timbercorp Finance leave to join Timbercorp Securities as the third defendant. The solicitors for Timbercorp Securities informed the Court that their client did not propose to participate in the present appeal to the extent that it related to the Collins proceedings and that it agreed to be bound by any decision made in this appeal.
On 2 September 2015, the primary judge held that the respondents were not precluded either by Anshun estoppel or by the principles of abuse of process from raising any of the defences pleaded to the claims of Timbercorp Finance in either proceeding.[7] In reaching that conclusion, he held that, in a proceeding under pt 4A, the only issues that could be determined were the questions of law or fact that were common to the plaintiff and all the group members.
[7]Timbercorp Finance Pty Ltd (in liq) v Collins [2015] VSC 461 (‘Reasons’).
Timbercorp Finance has applied for leave to appeal against the order of the primary judge. In summary, for the reasons set out below, we have reached the following conclusions which are sufficient to dispose of the application for leave to appeal.
The only essential conditions that must be satisfied for the commencement of a group proceeding are those contained in s 33C(1) of the Act; if those conditions are met, there is nothing to prevent plaintiffs from raising issues for determination in which they have no interest. Further, the Court has power to permit any group member to draw ‘remaining questions’ to its attention pursuant to s 33Q(1). A group member may be ‘Anshun estopped’ only if it was unreasonable for him or her not to have raised, during the group proceeding, some claim other than the common questions of law or fact. However, it does not follow that the failure by a group member to opt out and/or to use s 33Q to draw the Court’s attention to any claim that is peculiar to that group member means that the group member will be automatically precluded from raising that claim in later proceedings. While pt 4A expressly provides for a statutory estoppel in respect of any determination of the common questions of law and fact, it does not provide for any estoppel in respect of claims peculiar to a group member that were not advanced in the group proceeding. Whether there will be an Anshun estoppel depends upon a ‘merits-based’ assessment taking into account all the circumstances of the case. The respondents are not to be taken as having abandoned their individual defences by reason of not having raised them in the group proceeding, or not having opted out of the group proceeding. Finally, estoppels may bind parties and their privies. However, the group members were not privies of the plaintiff in respect of their unpleaded claims and defences and are not to be taken as having abandoned their individual defences by reason of the plaintiff not having raised them as claims in the group proceeding.
In the present case, the respondents are not precluded from advancing their individual defences. Accordingly, although we would grant leave to appeal in each proceeding, the appeals should be dismissed.
Factual background
The Collins loan
On 12 June 2008, Mr and Mrs Collins applied to Timbercorp Finance for a loan of $51,300 for the acquisition of 10 grove lots in what was known as the 2008 Olive Early Project, being a registered managed investment scheme operated by Timbercorp Securities. The loan amount was 90 per cent of the total cost of the lots, with Mr and Mrs Collins having themselves paid a 10 per cent deposit of $5700 to Timbercorp Securities. On 15 June 2008, Timbercorp Securities advised that Mr and Mrs Collins’s application for the lots was accepted. Mr and Mr Collins also received a letter of acceptance of their application for finance dated 15 June 2008.
Timbercorp Finance alleges, inter alia, that, on or about 30 June 2008, the loan amount of $51,300 under loan agreement L0026087 in respect of this project was paid to Trust Company of Australia Ltd as custodian and agent for Timbercorp Securities and that Timbercorp Finance, thereby, made a loan to Mr and Mrs Collins in accordance with the terms of the loan agreement.
On or about 1 July 2009, Timbercorp Finance alleges that Mr and Mrs Collins defaulted under the loan agreement.
The Tomes loans
On or about 8 May 2008, Mr Tomes applied to Timbercorp Finance for a loan in the amount of $994,410 to fund part of the cost of his initial investment in another registered managed investment scheme operated by Timbercorp Securities, known as the 2007 Almond Post June Project, as well as in the 2008 Olive Early Project.
Timbercorp Finance alleges, inter alia, that, on or about 30 June 2008, the loan amount under loan agreement L0025296 in respect of these projects was paid to the custodian and agent for Timbercorp Securities and, thereby, Timbercorp Finance made a loan to Mr Tomes in accordance with the terms of that loan agreement.
On or about 31 October 2008, Mr Tomes applied to Timbercorp Finance for a further loan in the amount of $247,545 to fund the payment of loan fees, management costs, rent and other amounts owing by him and relating to his investment in the two projects.
Timbercorp Finance alleges, inter alia, that on or about 31 October 2008, the loan amount under a further loan agreement L0028248 was paid to Timbercorp Securities and, thereby, Timbercorp Finance made a loan to Mr Tomes in accordance with the terms of that loan agreement.
Timbercorp Finance says that Mr Tomes defaulted under both loan agreements on or about 1 July 2009.
Origins of the group proceeding
On 13 May 2009, Macpherson + Kelley (‘M+K’), solicitors, published a circular to investors in Timbercorp managed investment schemes. The circular said, among other things:
Macpherson + Kelley has a strategy which would provide welcome relief, especially for growers who took out loans from Timbercorp Finance Pty Ltd in 2008 (and possibly even in 2007). The strategy will allow you to hold on to your cash that you would otherwise be using to meet repayments on those loans.
The strategy is based on the failure of Timbercorp Securities Limited to disclose to growers the extremely poor financial position of the Timbercorp Group. By law the Responsible Entity should have told growers of the parent companies’ having already been in default under bank covenants at the time the Timbercorp invoices were sent to growers.
If you want to take advantage of this offer, Macpherson + Kelley would write letters on your behalf to the Timbercorp Administrators, KordaMentha. The letters would press your claims against Timbercorp Securities Limited and Timbercorp Finance Pty Ltd, relying on specialist areas of law dealing with joint venture agreements, trade practices legislation, the Corporations Act and the Australian Securities and Investments Commission Act.
Expected benefits of pursuing your legal rights
•You could lawfully withhold making any loan repayments to Timbercorp Finance Pty Ltd while claims are processed
•You would assert a right to be repaid all money you have already paid under the loans you obtained in 2008
•To the extent you paid the 2008 invoices from your own money you would assert a right to be refunded that money
•The Timbercorp Administrators would be asked to pass on your claims to the company’s insurers
•You will have an immediate, ready answer and line of defence to resist any attempt by debt collectors to recover payment arrears and penalties from you. The Administrators have already sent out letters of demand
•You can put to better use the money you would save by not having to keep up payments to Timbercorp Finance Pty Ltd.
To take advantage of this offer
…
3.A cheque to cover the reading of your documents and the preparation of two separate comprehensive letters of demand to be sent on your behalf to the Administrators of the two relevant Timbercorp companies.
Your cheque should be made payable to Macpherson + Kelley Trust Account in the amount of $275 (including GST).
In or about June 2009, KordaMentha received correspondence from M+K on behalf of numerous persons and entities who had invested in Timbercorp schemes and who had entered into loans with Timbercorp Finance.
On or about 9 June 2009, M+K issued a further circular to managed investment scheme investors advising, among other things, that: (a) M+K were sending batches of letters of demand on behalf of each of their numerous clients in the matter; (b) these letters would allow investors to ignore any formal demand notices received from KordaMentha; (c) investors receiving demands for payment or threats in relation to legal action or reports to credit reference agencies should tell Timbercorp staff that they were being represented by a lawyer who was writing to KordaMentha about the matter; and (d) legal grounds existed for not making further payments, especially in respect of loans obtained in 2008, and perhaps earlier.
Collins and Tomes become clients of M+K
On 12 June 2009, Mr and Mrs Collins gave authority to M+K to act on their behalf to pursue rights and remedies against the Timbercorp Group. The formal retainer, signed 18 September 2009, provided that M+K would ‘represent [Mr and Mrs Collins’s] interests when dealing in the first instance with the issues common to all participants in the class action and then with [their] unique issues within the framework of the class action’. At the time of the group proceeding, Mr Collins was not aware of any individual investor issues concerning himself and Mrs Collins that were not covered by the common questions in the group proceeding. Mr Collins therefore did not take any steps to opt out.[8]
[8]See [57] below.
On 17 June 2009, M+K wrote to KordaMentha advising that they acted on behalf of Mr Collins as trustee for the D & J Consulting Superannuation Fund. In that letter, M+K said that Mr Collins had suffered or was likely to suffer loss or damage by reason of the failure of Timbercorp Securities to make appropriate disclosure of its true financial position and by reason of contraventions of the Trade Practices Act 1974 (Cth). In addition, the letter made claims based on s 601FC of the Corporations Act 2001 (Cth) (‘Corporations Act’). The letter requested that Timbercorp Finance refrain from any recovery action.[9]
[9]A copy of the 17 June 2009 letter was provided to Mr Collins.
On the same day, M+K sent a further separate letter to the administrators on behalf of Mr Collins. In that letter, M+K said that, by reason of his offsetting claims, Mr Collins was not required to make any further payments in respect of his loans. It requested that Timbercorp Finance refrain from recovery action and said that, if such action commenced, M+K expected to receive instructions to apply for an injunction to restrain further recovery until the offsetting claims were determined.
On or about 22 June 2009, M+K issued a circular to investors in Timbercorp schemes. The circular advised clients again to withhold loan payments and informed clients that, if the matter went to court, it would be argued that the subject loans were invalid.
In September 2009, Mr Tomes agreed to participate in the proposed group proceeding.
On 20 November 2009, Mr Tomes sent an email to M+K in which he brought to the firm’s attention matters that related to the manner in which he came to make his investments, and particularly representations which he says were made to him about what would happen if he fell on difficult times while significantly indebted to Timbercorp. He says that M+K did nothing to bring these matters to the attention of the Court on his behalf during the trial of the group proceeding.
The initial proceedings in the Supreme Court
In June 2009, Timbercorp Finance commenced proceedings against 20 defaulting borrowers to recover loan moneys (‘the initial proceedings’). The initial proceedings did not include Mr and Mrs Collins or Mr Tomes.
Each of the initial proceedings was managed by Judd J. Following service of the initial proceedings, M+K filed appearances in nine of the initial proceedings.
Mr Woodcroft-Brown was not a defendant to any of the initial proceedings.
On 24 July 2009, at a directions hearing before Judd J in the initial proceedings, counsel for defendants who had retained M+K told the Court that M+K had some 1400 clients with respect to the Timbercorp Group, and foreshadowed the commencement by an M+K client of a group proceeding against Timbercorp Securities and Timbercorp Finance.
The development of the group proceeding
During July and August 2009, M+K sent circulars to its clients that spoke of the desirability of commencing group proceedings against Timbercorp Securities and Timbercorp Finance on behalf of all affected investors.
Over the same period, there were several directions hearings in the initial proceedings. At those directions hearings, the Court was told that a group proceeding was being foreshadowed. By late August 2009, M+K had developed a draft statement of claim in the proposed group proceeding. For various reasons (including a difficulty in locating a suitable plaintiff), that proceeding was not commenced until October 2009.
During September 2009, Mr and Mrs Collins and Mr Tomes agreed to participate as group members in the proposed group proceeding.
Timbercorp Finance suspended its loan recovery project once the group proceeding commenced and recommenced the project when the group proceeding was finally determined and appeal avenues had been exhausted in 2014.
Commencement of the group proceeding
On 27 October 2009, Mr Woodcroft-Brown commenced the group proceeding, on his own behalf and on behalf of other Timbercorp scheme investors. In the sixth further amended statement of claim, the group was defined as follows:
This proceeding is commenced by the plaintiff on his own behalf and on behalf of all persons who:
(a)at any time during the period between 6 February 2007 and 23 April 2009 (the relevant period) acquired and/or held an interest in a managed investment scheme of which Timbercorp Securities Limited (ACN 092 311 469) (in liquidation) (TSL) was the responsible entity (the schemes) (scheme member);
PARTICULARS
[The relevant schemes were set out in a schedule to the pleading.]
(b)suffered loss or damage by the conduct of the defendants alleged herein; and
(c)are not:
(i) defendants to the proceeding;
(ii) parents, siblings, spouses or children of defendants;
(iii)bodies corporate of which a defendant was an officer or majority shareholder (defendant’s company) at any time during the relevant period; or
(iv)beneficiaries of any trust, the trustee of which is or at any time during the relevant period was a defendant or defendant’s company.
(Group Members)
The relief sought against Timbercorp Finance relevantly included (a) orders declaring that it was involved in contraventions of various provisions of the Corporations Act and the Corporations Law and (b) damages under various provisions of that Act and that Law. In addition, the following relief was sought:
Further or alternatively, orders under s 1325 of the Corporations Act (and s 1022C in respect of Group Members who are retail clients and/or s 729 of the Corporations Law) declaring that the Plaintiff and Group Members not be liable for any loans, fees or costs in connection with any of the schemes from February 2007 and any loans entered into with [Timbercorp Finance] in this period as a result of the breach of statutory duty be declared void or otherwise unenforceable.
As against Timbercorp Securities, the relief sought included orders declaring that the plaintiff and group members not be liable for any fees or costs in connection with any schemes from February 2007. Similar relief was also sought against the directors.
M+K were the solicitors for Mr Woodcroft-Brown in the group proceeding at all times. They appeared for him on the appeal and in the High Court special leave application. They remain the solicitors on the record in the group proceeding.
Reports to class members
Throughout the duration of the group proceeding, M+K provided a series of reports to possible group members, including Mr and Mrs Collins and Mr Tomes. The reports were addressed to ‘all MIS investors represented by Macpherson + Kelley’ or ‘Investors in Timbercorp and Great Southern MIS Projects’.
On or about 21 December 2009, M+K issued a circular to investors in the Timbercorp and Great Southern projects. The circular referred to a directions hearing in the group proceeding. The circular stated that, at the directions hearing, the Court said that it wanted to hear submissions as to whether the existing claim would be expanded to include any new claims based on misleading or deceptive conduct in connection with the promotion and sale of interests in particular projects that were fundamentally flawed from the beginning. The circular said:
We had already flagged the Table Grape Projects of 2004 and 2005 as a distinct possibility in that category. We continue examining other projects and will draw those to the attention of the Court on 18 February 2010 in connection with possibly linking new claims in with the existing Court proceeding.
On or about 3 June 2010, M+K issued a circular to M+K Timbercorp investors. The circular said, amongst other things, that joint submissions were being prepared ahead of the next case management hearing that addressed such things as ‘whether there ought be any sub-groups formed to tackle specific aspects of the case’, and what was to happen with counterclaims made by any of the defendants. The circular also said that consideration would be given to the manner of dealing with any claims the defendants might want to bring against third parties.
On or about 18 June 2010, Timbercorp Finance filed and served, among other things:
(a) a defence to the group proceeding and a counterclaim against Mr Woodcroft-Brown personally;
(b) a notice of counterclaim against Mrs Woodcroft-Brown;
(c) a notice of counterclaim seeking indemnity and/or contribution against Timbercorp Securities and its directors; and
(d) a third party notice and statement of claim against Timbercorp Ltd and entities involved in the provision of financial advice to Mr and Mrs Woodcroft-Brown.
In the counterclaim against Mr and Mrs Woodcroft-Brown, Timbercorp Finance alleged breaches under their loan agreements and sought payment for the outstanding loans plus interest and costs.
On about 9 July 2010, Mr and Mrs Woodcroft-Brown filed a reply and defence to Timbercorp Finance’s defence and counterclaim.
The first opt out notice
On 11 October 2010, Judd J approved an opt out notice and ordered, among other things, that it be published and sent to specified investors.
Under a heading ‘Background’, the opt out notice said that ‘[t]he Plaintiff alleges that he and group members suffered financial loss because, during the period commencing 6 February 2007 and ending 23 April 2009 (“the Relevant Period”), the Defendants failed to disclose various matters that affected, or were likely to materially affect, investments made in the following Timbercorp managed investment schemes (“the Schemes”)’.
The opt out notice then identified several Timbercorp schemes that existed between 2001 and 2008. In addition, it contained the following:
The Plaintiff also alleges that during the Relevant Period, he and group members suffered financial loss because the Defendants made false, misleading, or deceptive representations to him and to group members, in relation to the Schemes.
Under the heading, ‘What happens if you do not OPT OUT’, the notice said:
If you are a group member and you do not give notice to opt out by 4.00pm on 10 DECEMBER 2010, you will be taken not to have opted out and will, under Australian law, be bound by the outcome of the class action and any judgment or determination made in it. If the class action is unsuccessful or is not as successful as you might have wished, you will not be able to make the same claim in any other proceedings.
Circular of 29 October 2010
On 29 October 2010, M+K issued a further circular to investors in the Timbercorp and Great Southern managed investment scheme projects. The circular dealt with the opt out notice, and said, in part, as follows:
·It sometimes happens that people will prefer to handle their own cases rather than be part of a group whose members will be bound by whatever decisions are made about ‘common issues’ in any trial in a class action. Other people are simply not interested in pursuing their legal rights and remedies at all.
·Presently there is a draft of 37 formulated questions, many with several parts, which will be the focus of the court’s attention in deciding on the common issues which will affect everyone participating in the case. …
·It is primarily for the benefit of the ‘go it alone’ people that the rules of court require that they be given the opportunity to exclude themselves from the coverage of the class action if they so wish. If anyone wants to exclude themselves from the coverage of the class action they will need to send a formal notice to the Supreme Court of Victoria by the advertised date. This will signal to the court that they do not wish to be counted among the people who will be bound by any decision handed down in the trial of the class action.
…
·Individual issues on an investor‑by‑investor basis would, under the class action framework, be worked through on the basis of the court’s findings upon the issues that were common to everyone.
·We do not expect many, if any, of our clients would want to opt‑out of the case. … From the very beginning of the case the situation has been that Macpherson + Kelley has been retained by its clients to represent them both on an individual basis and as a member of the class on whose behalf the client action has been conducted. For everyone who remains a client of Macpherson + Kelley who does not send an opt‑out notice to the court we will continue handling their individual file and the ancillary class action file.
…
·You can simply ignore the formal opt‑out notice if you are happy for Macpherson + Kelley to continue representing you in the class action and in the individual investor issues that are to be resolved under the claim.
When he read the advice, Mr Tomes took the sentence that referred to continuing to handle clients’ ‘individual file[s]’ and the ancillary class action file to mean that his own specific case was being looked after, including what he had raised in his email on 20 November 2009.[10]
[10]See [31] above.
On 5 November 2010, the group proceeding was fixed for trial on 3 May 2011, on an estimate of 8 to 10 weeks.
On 13–14 November 2010, the first opt out notice was published in The Australian (Weekend Edition).
Collins and Tomes receive the opt out notice
In November 2010, Mr Collins received a copy of the opt out notice, issued pursuant to the court’s order made on 11 October 2010. He maintained his decision to remain a client of M+K for the purposes of the group proceeding and individual investor issues that were to be resolved under the claim. He said ‘I remained of the belief that there were no individual investor issues concerning us that were not covered by the common questions’. He did not return the notice.
Mr Tomes believes he received the opt out notice sometime in October 2010. Mr Tomes read the notice. It made no mention of any loan agreement, or that by not signing and returning it, Mr Tomes might be shut out later on from resisting any recovery proceedings that might be brought against him. Mr Tomes did not sign it.
In or about December 2010, the Supreme Court registry prepared a list of those who had opted out. It recorded that over 850 persons or entities had filed opt out notices with the Court.
In January 2011, the plaintiff in the group proceeding filed an application for leave to file and serve a fifth further amended statement of claim. The application sought, among other things, to add new causes of action concerning material non‑disclosure across a nine year period in relation to the financial structures of the Timbercorp Group of companies.
On 9 February 2011, at a directions hearing, Judd J ordered, among other matters, that the counterclaims and the third party proceedings be tried separately from the main proceeding, after the determination of the common questions in the group proceeding set out in an annexure to those orders.
Revised opt out notice
On 11 March 2011, Judd J approved the publication of a revised opt out notice. The revised opt out notice was occasioned by amendments made to the statement of claim. The relevant warning about the consequences of not opting out was as follows:
The Plaintiff also alleges that he and group members suffered financial loss because, between 4 April 2000 and 23 April 2009, the Defendants failed to disclose risks, associated with the financial structure and operations of the Timbercorp Group of Companies, that affected, or were likely materially to affect, the safety and prospects of investments made in the Schemes.
Further, the Plaintiff alleges that he and group members suffered financial loss because the Defendants made false, misleading or deceptive representations to him and to group members, in relation to the Schemes.
If you are a group member then the class action will determine your rights, if any, to compensation or other relief unless you choose to opt out of the class action.
…
If you do not give notice to opt out by 4.00pm on 15 APRIL 2011, you will be taken not to have opted out and will, under Australian law, be bound by the outcome of the class action and any judgment or determination made in it. If the class action is unsuccessful or is not as successful as you might have wished, you will not be able to make the same claim in any other proceedings.
Mr Collins received but again did not return the revised opt out notice.
On about 16 March 2011, Mr Tomes received a circular from M+K which made reference on the first page to a revised form of opt out notice. Mr Tomes received the notice around the same time as this update. Mr Tomes did not sign and return the revised opt out notice.
On 26–27 March 2011, the revised opt out notice was published in The Australian (Weekend Edition).As a result of the revised opt out notice, a further 250 persons or entities filed opt out notices, and 200 persons filed withdrawal of opt out notices.
The nature of the group proceeding
Briefly stated,[11] the plaintiff said that, had certain matters been disclosed, he would not have invested in the managed investment schemes or borrowed money from Timbercorp Finance. He said that Timbercorp Securities had failed to disclose in its Product Disclosure Statements (‘PDSs’) information about significant risks, or risks that might have had a material influence on the decision to invest, in breach of its disclosure obligations under the Corporations Act. He also argued that the PDSs given to investors contained false and misleading statements. Further, he argued that the declarations made by the directors in two scheme financial reports were false or misleading, and in breach of the Corporations Act, the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’) and the Fair Trading Act 1999 (Vic) (‘FTA’). He sought declaratory relief, damages and/or compensatory orders, including an order that the plaintiff and the group members were not liable for repayment of the loans from Timbercorp Finance.
[11]The following account of the group proceeding is taken from the account contained in the judgment of the Court of Appeal: Woodcroft-Brown v Timbercorp Securities Ltd [2013] VSCA 284 (Warren CJ, Buchanan JA and Macaulay AJA).
The trial was conducted over 24 days. It dealt with common questions and only looked at individual loss, reliance and causation in relation to the plaintiff and one other person. In its reasons, the Court of Appeal identified ‘two threads’ to the plaintiff’s case: one was a non-disclosure case; the other a misrepresentation case.[12]
[12]Ibid [28].
In respect of his non-disclosure case, the plaintiff submitted that the Timbercorp companies had failed to disclose matters relating to ‘structural risk’ and ‘adverse matters’. He said that the structural risk was a risk that the Timbercorp Group might fail because of insufficient cash, with a consequential risk to the viability of the schemes managed by Timbercorp Securities. He said that the adverse matters were matters alleged to have put the business of the Timbercorp Group at a heightened risk of failure. In this respect, he relied principally on (a) a tax announcement made on 6 February 2007 which was to the effect that a draft taxation ruling was being prepared which would mean that investors in non-forestry managed investment schemes would no longer be able to claim upfront deductions for contributions to such schemes and (b) the global financial crisis and its resulting impact on the availability of credit.
With respect to matters of ‘structural risk’, Judd J made various findings of fact to the effect that, when the PDSs were published, there was no significant risk of the group collapsing and that the risk as pleaded was not one about which it could be said, under s 1013D of the Corporations Act, that a retail client would reasonably require information for the purpose of making a decision to acquire the product.
Judd J held that Timbercorp Securities was not required to provide information on the structural risk or adverse matters to potential or existing investors. He held that the plaintiff’s non-disclosure case, as pleaded, failed.
During the trial, the plaintiff produced a document entitled ‘plaintiff’s case in a nutshell’. In that document, the plaintiff’s case shifted beyond its pleaded case. In it, the plaintiff developed the proposition that, due to its business model, ‘the Timbercorp Group was critically dependent on its ability to maintain and increase its borrowings’ and that this dependency was a significant risk that should have been disclosed.[13]
[13]In its reasons, the Court of Appeal said: ‘The trial judge formed the view that the reformulation of the appellant’s case was an attempt to “sidestep” the opinions found in the joint experts’ report which his Honour held was “a complete answer to the structural risk case as pleaded.” It was agreed by the experts that as long as the Group’s bankers continued to support the Group’s operations there was no significant risk that the Group would not have had the financial capacity to manage any of the schemes through to their contemplated completion. His Honour held that the “lack of materiality of investor defaults and the willingness of the banks to increase their level of support for the Group until the end of 2008 had the effect of eroding the content of the structural risk as pleaded and particularised by the plaintiff”’: ibid [76].
Judd J did not permit the plaintiff to propound the unpleaded case. However, he went on to find that, even on his unpleaded case, the plaintiff would not have succeeded. He found that the evidence before him did not reveal any unique or particular fragility in the Timbercorp business model. Moreover, he also held that the PDSs issued during the relevant period disclosed information about the unpleaded risk, in so far as it was required.
In respect of his misrepresentation case, the plaintiff said that the Timbercorp Group had made two types of false representations. The first was that the group was, financially, sufficiently strong that investors could reasonably expect the schemes to be managed for the foreseeable future and that the principal risks associated with the relevant schemes were fully disclosed. The second was that scheme contributions equalled or exceeded the cost of establishing and managing a scheme, in that investors’ payments would be ‘quarantined’ and applied only to their relevant scheme, and scheme contributions would be sufficient to fund the relevant project. Judd J found that the first representations were either too vague or uncertain to be actionable and that there were reasonable grounds for confidence in the strength of the group in any case. He also held that the mere occurrence of the adverse matters did not make the representations false or misleading because those matters were able to be successfully managed. He found that the second representations (a) were not made, (b) were inconsistent with the PDSs and other generally available information and (c) were inconsistent with the claimed reliance on the strength of the group.
The plaintiff also argued that Timbercorp Securities and its directors made statements in March and September 2008 that were misleading or deceptive. The relevant statements were to the effect that there had been no circumstances that had significantly affected, or may have significantly affected, the operations of the relevant schemes, the results of those operations or the state of affairs of the schemes in future financial years. The plaintiff also argued in the alternative that Timbercorp Finance was liable under the Corporations Act, the ASIC Act and the FTA because the contravening conduct was engaged in on its behalf or because it was knowingly concerned in the contraventions. Judd J found that the plaintiff’s case failed on causation and reliance.
Hearing and dismissal of the group proceeding
On 27 October 2011, Judd J delivered reasons for his decision in relation to the common questions, costs and the orders to be made in light of the decision (‘the final decision’). He:
(a) made a declaration pursuant to s 33ZB(a) of the Act as to the persons affected and bound by the orders;
(b) approved the form and content of a notice to be given to group members of the final decision and of the orders made (‘the judgment notice’);
(c) ordered that:
(i) Mr Woodcroft-Brown’s claim, in both his individual and representative capacity, against the defendants be dismissed;
(ii) the claim of Francis Jeremy van Hough against the defendants be dismissed;
(iii) the common questions be answered in the form attached to his order (‘common questions and answers’);
(iv) the making of consequential orders in respect of the defendant’s third party proceedings and proceedings seeking contribution stand reserved;
(v) the making of directions with respect to the further conduct of Timbercorp Finance’s counterclaim against Mr and Mrs Woodcroft-Brown stand reserved and be adjourned sine die;
(vi) Mr Woodcroft-Brown pay the defendants’ costs of and incidental to the claim against the defendants, including reserved costs on a party-party basis;
(vii) the judgment notice in the form annexed to the order be approved for the purpose of giving notice to group members of the court’s decision.
Common questions and answers
In his order, Judd J identified the common questions which were decided in the group proceeding and the answers that he gave to them. In all, there were 33 such questions. In large part, the questions concerned the disclosure obligations of Timbercorp Securities in respect of various managed investment schemes that had been established by it between 2001 and 2008, including the schemes in which Mr and Mrs Collins and Mr Tomes had invested, and allegations that members of the Timbercorp Group had engaged in misleading or deceptive conduct. Generally speaking, the disclosure obligations were said to arise from the facts that: (a) the cash-flows to the Timbercorp Group were uncertain and its funding may be inadequate; (b) a tax decision was announced in February 2007 that had the potential to jeopardise the continued willingness of people to invest in non-forestry managed investment schemes; (c) a substantial deterioration in credit and financial markets occurred in late 2007; and (d) the Timbercorp Group was in breach of certain loan covenants in its bank facilities.
The questions in relation to the allegations of misleading or deceptive conduct involved whether: (a) the continuing promotion and provision of loans to investors by the Timbercorp Group constituted representations that the schemes were viable and the Timbercorp Group financially secure; (b) the offering of loans constituted representations that the funds would be applied to fund the particular scheme; and (c) the failure to disclose the matters the subject of the disclosure obligations constituted representations that the Timbercorp Group was viable, financially secure, and so forth.
There were also common questions in respect of (a) reliance and causation and (b) loss and damage in relation to what were described as the Sample Group Member Schemes.[14]
[14]The present respondents were investors in some of the Sample Group Member Schemes.
Timbercorp Finance issues recovery proceedings
As noted earlier, the Court of Appeal dismissed an appeal from Judd J’s decision in the group proceeding and the High Court refused an application for special leave to appeal that decision. Since the disposition of the application for special leave, Timbercorp Finance has commenced 1288 proceedings for the recovery of moneys owing under loans. As at 24 April 2015, 1109 of those proceedings remained extant. M+K are the solicitors on the record in 296 proceedings, 195 of which raise defences, set offs and other allegations equivalent to those raised by Mr and Mrs Collins in their defence. The liquidators of Timbercorp Finance have yet to issue proceedings in respect of approximately 360 additional borrowers whose loans are in default.
Claim against Mr and Mrs Collins
Timbercorp Finance alleged that, on 19 March 2010, it made a demand for the total amount owing under the loan agreement and that Mr and Mrs Collins had failed to meet the demand. It says that, by letter dated 2 May 2014, it wrote to Mr and Mrs Collins confirming that they remained in default of their payment obligations under the loan agreement and advising that it intended to issue proceedings.
By a writ dated 13 June 2014, Timbercorp Finance claims against Mr and Mrs Collins moneys outstanding under loan agreement L0026087 for the sum of $51,300.
In July 2014, M+K received from Timbercorp Securities:
(a) a set of executed licence agreements in respect of the 2008 Timbercorp olive project invested in by Mr and Mrs Collins. None of those licence agreements named Mr or Mrs Collins in the schedule; and
(b) a series of letters variously dated May and June 2008 concerning instructions given to the trust custodian in respect of the flow of application moneys relating to olive grove lots that had been allocated in the 2008 Timbercorp olive project. The schedules for that series of letters were redacted documents with neither Mr nor Mrs Collins’s name appearing on any of them.
Mr Collins was unable to say whether he or his wife, but for the redactions, were among the identified growers in any of the schedules (to the letters) which listed persons said to have been allocated lots in the project.
On 12 August 2014, Mr and Mrs Collins filed a defence and counterclaim.
On 6 March 2015, M+K received from Timbercorp Securities an executed copy of the grove lot management agreement for the 2008 Timbercorp olive project.
On 15 April 2015, M+K received from Timbercorp Finance a copy of a signing page of the loan agreement with Timbercorp Finance and a standard form set of provisions described in the footer of each page as ‘Loan Explanation and Loan Terms’ issued by Timbercorp Finance, pertaining to the Collinses’ application for finance for acquisition of grove lots in the 2008 Timbercorp olive project. Mr Collins gave evidence that he could not recall seeing such a signing page for either his wife or himself or any such document.
Amended defence of Mr and Mrs Collins to recovery proceedings
By their amended defence dated 12 February 2015, Mr and Mrs Collins admit applying for the loan, but make several allegations as a result of which they contend that there was no loan advanced to them and they did not acquire an interest in the 2008 Timbercorp olive project. In large part, these contentions depend upon the allegations that there were contraventions of the constitution of the 2008 Timbercorp olive project and that, by reason of the same persons being directors of all the relevant Timbercorp companies, Timbercorp Finance had knowledge of and was a party to those contraventions. In the amended defence, there is a description of the manner in which interested parties made applications for loans from Timbercorp Finance and how those applications were to be satisfied by the release of funds by Timbercorp Finance to Timbercorp Securities. The pleading alleges several failures by relevant Timbercorp entities to conform with all the requirements necessary for the release of funds. In particular, they contend that:
(a) in mid-June 2008, Mr and Mrs Collins returned to Timbercorp Securities an application form for a specified number of grove lots together with a power of attorney with respect to a loan application for funds from Timbercorp Finance sufficient to cover the acquisition of the grovelot licence;
(b) when Timbercorp Finance received their loan application form, it drew down upon a loan facility provided to it by the ANZ Bank, an amount at least equal to Mr and Mrs Collins’s alleged loan amount and directed that those funds be paid to the trust custodian;
(c) Timbercorp Ltd instructed the trust custodian to pay the funds to Timbercorp Ltd, which, thereafter, used the moneys in the course of its business;
(d) Mr and Mrs Collins were required to secure their obligations under Timbercorp Finance’s loan by assigning to it, by way of security, their interest in each grove lot applied for;
(e) under the constitution for the 2008 Timbercorp olive project, Timbercorp Securities:
(i) was required to prepare grove lot licence agreements and management agreements;
(ii) could only release application moneys for grove lots under the grovelot licence agreements and management agreements;
(iii) was permitted to release application moneys only after it had reasonably satisfied itself that there were in place relevant grove lot licence agreements and management agreements;
(f) Timbercorp Securities failed to comply with these relevant provisions because it could not reasonably satisfy itself that those agreements were in place, by reason that the schedule of the alleged licence agreement did not name Mr and Mrs Collins as persons allocated lots in the project;
(g) alternatively, by reason of there being no licence agreement, there were no ‘fees payable’ under the management agreement or any licence agreement in respect of which Timbercorp Securities could use any application moneys received by it from Mr and Mrs Collins or from Timbercorp Finance on their behalf; and
(h) by reason of these facts and matters, Timbercorp Securities could not use any application moneys purportedly received from Timbercorp Finance on behalf of Mr and Mrs Collins, and was instead required to hold and retain the moneys on trust for Mr and Mrs Collins.
Further, Mr and Mrs Collins say that Timbercorp Finance has not made a loan to them in response to their loan applications because (a) Timbercorp Finance did not pay to Timbercorp Securities the moneys drawn down by Timbercorp Finance as the payment of the balance of their application money; (b) Timbercorp Finance has not made any advance or loan to them within the loan terms prescribed by it under the relevant finance package; and (c) Timbercorp Finance has not at any time made a payment for their benefit.
In addition, Mr and Mrs Collins contend that Timbercorp Finance owed them duties of care which it has breached and that as a result of those breaches, they have suffered loss and damage which they have quantified as ‘the alleged indebtedness’ to Timbercorp Finance, and they contend that they are entitled to set off, against any liability they may have to Timbercorp Finance, its liability to them for damages.
Further, they say that Timbercorp Finance took advantage of their relatively weak bargaining position such that any assertion by Timbercorp Finance of its rights under the loan agreement is unconscionable and, thus, a contravention of various provisions of the ASIC Act.
Claim against Mr Tomes
By a writ dated 12 September 2014, Timbercorp Finance made two claims against Mr Tomes: the first under loan agreement L0025296 and the second under loan agreement L0028248.
In its proceeding, Timbercorp Finance claimed as follows:
(a) under loan agreement L0025296, the sum of $1,760,368.34 plus interest; and
(b) under loan agreement L0028248, the sum of $448,280 plus interest.
Amended defence of Mr Tomes to recovery proceedings
Mr Tomes filed an amended defence and counterclaim on 25 February 2015.
In his defence, Mr Tomes refers to one Spencer Broad, who, he says, was an agent of Timbercorp Finance. He also says that, by reason of the common directorships of Timbercorp Securities and Timbercorp Finance, the knowledge of the former was also that of the latter.
In respect of loan agreement L0025296, Mr Tomes says that Mr Broad made a series of representations to him, on behalf of Timbercorp Finance, upon which he relied before deciding to invest in the various projects. He said there were representations that:
(a) if he defaulted on his loan, Timbercorp Finance would not seek recourse against him; rather, it would take possession of his grovelots and sell them on the secondary market;
(b) all the borrowed funds would be applied solely to pay the application money for his grovelots;
(c) the value of his grovelots would not decrease as they had been fully funded by the initial application money and ongoing rent and management fees, which would be applied only to the relevant project;
(d) in the event of Timbercorp failing, the projects would continue even without Timbercorp Securities as the responsible entity as the projects were structured to be stand-alone, fully funded and sustainable and there would be continuity of day to day management which had been outsourced to experts;
(e) the project for which he was obtaining finance was a fully funded investment.
He said that the representations were partly in writing (he referred to a cash flow spreadsheet that was given to him) and partly oral (he referred to a meeting that he had with Mr Broad at his office on or about 8 May 2008). Mr Tomes contends: (a) that the representations were misleading or deceptive and in contravention of s 12DA(1) of the ASIC Act; and (b) that, by reason of the representations, his reliance upon Mr Broad and Timbercorp Finance’s knowledge of Mr Broad’s relationship of trust and confidence with him, Timbercorp Finance had engaged in unconscionable conduct in contravention of s 12CA(1) or alternatively s 12C(1) of the ASIC Act.
Mr Tomes says that the documentation in respect of loan agreement L0025296, pursuant to which moneys were purportedly advanced on his behalf, was executed by one John Stuart Murray as his purported power of attorney. He says that, when he filled out the relevant application for finance in 2008, he did not appoint either Timbercorp Finance or any of its directors or employees as his attorney. Accordingly, Mr Murray was not his attorney and, in the event, no loan agreement was entered into between him and Timbercorp Finance.
Mr Tomes claims that it was an essential term of loan agreement L0025296 that its proceeds were to be advanced by Timbercorp Finance to Timbercorp Securities solely as payment for his lots and his loan application fee. He says that the loan moneys were not advanced for that sole purpose but were applied for the purposes of the Timbercorp Group generally and that, as a result, the loan agreement was repudiated and, Mr Tomes having accepted the repudiation, the loan agreement was void ab initio.
Further, Mr Tomes contends that the repayments that he made in respect of loan agreement L0025296 were paid under a mistake of fact, that is (a) that the loan had been validly executed and (b) that the moneys had been advanced by Timbercorp Finance to Timbercorp Securities or there had been a total failure of consideration. As a result, Timbercorp Finance would be unjustly enriched if it were permitted to retain the repayments and it holds them on resulting or constructive trust for Mr Tomes.
In respect of loan agreement L0028248, Mr Tomes advances similar defences.
Finally, Mr Tomes says that, in the event that both loan agreements were valid and enforceable, Timbercorp Securities contravened the duties imposed upon it both under the Corporations Act and the relevant projects’ constitutions in the use made of the funds which were advanced. In so far as the moneys became trust moneys, Timbercorp Securities could only use the funds for the purposes for which they had been provided and was required to hold those funds separate from any other property. Its failure to do so meant that it had acted in breach of trust, in respect of which Timbercorp Finance provided knowing assistance.
Preliminary question in Collins and Tomes proceedings
By its amended replies dated 9 April 2015, Timbercorp Finance contended that the respondents were precluded from raising their pleaded defences by reason of the fact that each was a group member in the group proceeding. In substance, Timbercorp Finance contended that the respondents were precluded by either or both of the doctrines of Anshun estoppel or abuse of process because (a) they had not opted out and (b) they had not sought to have their individual claims ‘case managed’ in the group proceeding. Timbercorp Finance did not submit that the respondents were precluded by res judicata or by issue estoppel.[15]
[15]Reasons [398].
On 1 April 2015, Judd J ordered in each of the two proceedings that the following question be determined as a separate question under r 47.04 of the Supreme Court (General Civil Procedure) Rules 2005:
Are the defendants [ie the present respondents] precluded from raising any and if so what defences pleaded by them in this proceeding by reason of their participation as group members within the meaning of Part 4A of the Supreme Court Act 1986 (Vic) in proceeding S CI 9807 of 2009 [the group proceeding]?
Differences between allegations in the group proceeding and those in the defences in the recovery proceedings
The issues in the group proceeding largely turned on the adequacy of representations made by Timbercorp Securities in its widely distributed product disclosure statements. The plaintiff contended that, in publishing what were described as the ‘defective’ PDSs and directors’ reports, Timbercorp Securities had contravened relevant provisions of the ASIC Act, the Corporations Act and the FTA. Generally speaking, he sought relief against Timbercorp Finance on the basis that it was a party to those contraventions. In some cases, the liability of Timbercorp Finance was said to be direct and not derivative, but on each of those occasions, that liability was alleged to arise from the fact that it had the same directors as Timbercorp Securities.
In their amended defences to the proceedings brought by Timbercorp Finance, Mr and Mrs Collins and Mr Tomes have raised matters that were personal to them: among other things, whether any loan had in fact been made to Mr and Mrs Collins, whether representations had been made personally to Mr Tomes such that, in the event of his default under his loans, recourse would be limited to his investments in the schemes, and whether the loan agreements with Mr Tomes had themselves been repudiated. However, Timbercorp Finance contends that there is a sufficient connectedness or closeness between the claims in the group proceeding and the respondents’ defences that they should now be precluded from relying on those defences.
Some relevant provisions in pt 4A of the Act
In part, the decision of the primary judge and these reasons concern the proper construction of ss 33C(1), 33Q, 33R, 33S, 33T and 33ZB of the Act. They provide as follows:
33C Commencement of proceeding
(1) Subject to this Part, if—
(a)seven or more persons have claims against the same person; and
(b)the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and
(c)the claims of all those persons give rise to a substantial common question of law or fact—
a proceeding may be commenced by one or more of those persons as representing some or all of them.
33Q Where not all questions common
(1)If it appears to the Court that determination of the question or questions common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining questions.
(2)In the case of questions common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person who consents to the appointment to be the sub-group representative party on behalf of the sub-group members.
(3)If the Court appoints a person other than the plaintiff to be a sub-group representative party, that person, and not the plaintiff, is liable for costs associated with the determination of the question or questions common to the sub-group members.
33R Individual questions
(1)In giving directions under section 33Q, the Court may permit an individual group member to take part in the proceeding for the purpose of determining a question that relates only to the claim of that member.
(2)In such a case, the individual group member, and not the plaintiff, is liable for costs associated with the determination of the question.
33S Directions for further proceedings
If a question cannot properly or conveniently be dealt with under section 33Q or 33R, the Court may give directions for the commencement and conduct of another proceeding, whether or not a group proceeding.
33T Adequacy of representation
(1)If, on an application by a group member, it appears to the Court that the plaintiff is not able adequately to represent the interests of the group members, the Court may substitute another group member as plaintiff and may make such other orders as it thinks fit.
(2)If, on an application by a sub-group member, it appears to the Court that the sub-group representative party is not able adequately to represent the interests of the sub-group members, the Court may substitute another person as sub‑group representative party and may make such other orders as it thinks fit.
33ZB Effect of judgment
A judgment given in a group proceeding—
(a)must describe or otherwise identify the group members who will be affected by it; and
(b)subject to section 33KA, binds all persons who are such group members at the time the judgment is given.[16]
[16]Section 33KA relates to the powers of the Court concerning group membership.
Judgment of the primary judge
The primary judge answered the preliminary question in both proceedings in the negative: the respondents were not precluded from raising any defences pleaded by them by reason of their participation as group members in the group proceeding. He held that Anshun estoppel did not apply to group members who seek to raise different claims in subsequent individual proceedings. He rejected a contention that, in deciding not to opt out, group members had renounced their individual claims and had determined that the common claims would represent the totality of all their claims. He also rejected a contention that, unless group members sought to have their individual claims case managed (pursuant to s 33Q) as part of the group proceeding, they were barred from raising those claims in later proceedings.
At trial, Timbercorp Finance contended that, once a group proceeding had been commenced, it became the vehicle for the determination of all issues ‘that arise from the same, similar or related circumstances’ within the meaning of s 33C(1)(b).[17] It said that the same or similar circumstances include ‘litigation arising from the entry into the loans with Timbercorp Finance’.[18] Group members are subject to all preclusionary principles including Anshun estoppel and abuse of process such that they are prevented ‘from raising in subsequent litigation issues that should have been brought forward in the group proceeding, unless any recognised exception is available’.[19] The provisions of pt 4A permit a group member to seek directions in relation to a claim not raised in the group proceeding (or even a claim that could not have been raised in the group proceeding). Nothing in pt 4A prevents the operation of these preclusionary principles.[20] In particular, s 33J allows a group member to opt out; s 33T allows a group member to apply to the Court if the plaintiff is not adequately representing a group’s interest; and ss 33Q, 33R, 33S, 33T and 33ZF confer on the Court power to give directions where a group member wishes to advance a claim that has not been pleaded by the plaintiff.[21]
[17]Reasons [386].
[18]Ibid [387].
[19]Ibid [388].
[20]Ibid [472].
[21]Ibid [390]–[393]. Section 33ZF confers general power on the Court to make ‘any order [it] thinks appropriate or necessary to ensure that justice is done in the proceeding’. It may make such an order ‘of its own motion or on application by a party’.
The primary judge held that the respondents could not have brought forward their individual claims for determination in the group proceeding because:
(a) under s 33C, a plaintiff in a group proceeding can only raise claims that are common to the plaintiff and the other group members: ‘[g]roup proceedings cannot encompass idiosyncratic claims that lack even this minimum degree of commonality’.[22] For example, the plaintiff in the group proceeding could not have raised claims arising out of oral representations made to particular members of the group as those representations were not made to other people at the same time;[23]
[22]Ibid [465].
[23]Ibid [466].
(b) only a party has standing to invoke s 33ZF and, further, any order made under that section can relate only to a matter which has been raised by a party;[24]
[24]Ibid [414]–[417]. See above n 21.
(c) the reference in s 33Q to ‘the remaining questions’ is a reference solely to those questions ‘which form part of the claim pressed by the plaintiff, which are left remaining after the determination of “the question or questions common to all group members”’.[25] The claims to which s 33Q refer ‘are claims already raised within the group proceeding and, on that basis, the provision does not operate to allow group members to seek directions in respect of claims not already raised in the group proceeding’.[26]
[25]Ibid [420]; see also at [471].
[26]Ibid [428].
(d) s 33R ‘is only enlivened if directions are being given under s 33Q’.[27] It ensures that the plaintiff will not be liable for the costs of the determination of a question that relates only to an individual group member;
[27]Ibid [449].
(e) s 33S supplements ss 33Q and 33R. Unlike those sections, it gives the Court power to give directions for the commencement and conduct of another proceeding;[28]
(f) s 33T does not give group members power to bring forward individual claims; it deals only ‘with the group interests not individual defences (or claims)’.[29]
[28]Ibid [452].
[29]Ibid [455].
The primary judge held that ss 33Q, 33R, 33S, 33T and 33ZF are all cast in permissive terms. Even if they permit the introduction into a group proceeding of
idiosyncratic dimensions and individual claims … [it] would be a much greater step, and indeed a step that was not required to resolve the difficulties facing plaintiffs wishing to bring a group proceeding, to establish a regime under which all idiosyncratic dimensions and individual claims must be raised and determined within the group proceeding. The concern of Part 4A was to ensure that idiosyncratic dimensions and individual claims do not prevent the initiation of a group proceeding.[30]
[30]Ibid [509].
The primary judge found that group members, not being parties to the group proceeding, do not have an express right to invoke s 33Q. Further, if group members were able to add ‘their many and varied claims to the group proceeding itself’, the time, cost, inefficiency and delay of side-tracking the group proceeding to hold case management directions would subvert the efficiency of group proceedings and might well be contrary to the overarching obligations under the Civil Procedure Act 2010.[31]
[31]Ibid [524].
The primary judge rejected the contention that the availability of Anshun estoppel would work to prevent a multiplicity of proceedings: (a) the wider the operation of the preclusive effect of a group proceeding, the more likely group members would opt out, causing the defendant to face subsequent litigation on the common questions;[32] (b) the application of this estoppel was fact intensive and would require an examination of the personal circumstances of each relevant group member;[33] (c) where an appropriate opt out notice was given, warning of potential preclusive effects, the introduction of individual claims and defences may work to make the determination of the common questions unmanageable;[34] and (d) a multiplicity of proceedings would in any event be likely in future group proceedings if group members began a practice of opting out so as to preserve their ability to run individual defences.[35]
[32]Ibid [639].
[33]Ibid [639]–[641].
[34]Ibid [642].
[35]Ibid [643]–[644].
Notwithstanding his ruling that the respondents could not have brought forward for determination their individual defences in the group proceeding and that Anshun estoppel did not apply against group members in group proceedings, the primary judge considered whether, if he was wrong in those conclusions, the respondents’ failure to bring their claims forward meant that they should be estopped pursuant to Anshun from doing so in later proceedings. He held that they should not be estopped as: (a) it was unlikely that the judge in charge of the group proceeding would have allowed the defences to be tried in that proceeding;[36] (b) there was no risk of inconsistent findings;[37] (c) the opt out notices did not warn the respondents ‘that unless they opted out they would be or may be precluded from raising any defences to the claims of Timbercorp Finance under their loan agreements’;[38] (d) the claims made against Timbercorp Finance did not raise any issues relating to the lending process it engaged in but only sought relief against it on the basis that it was an accessory to the misleading conduct of Timbercorp Securities;[39] (e) the respondents would have had to have retained their own lawyers and, even so, they had no entitlement to raise their current defences in the group proceeding;[40] (f) the plaintiff in the group proceeding was not able to raise the individual defences as those defences would not have been common to at least six other group members together with the plaintiff;[41] and (g) there was no risk of inconsistent judgments as the group proceeding did not raise the defences of the individual respondents.[42] Accordingly, it was not unreasonable of the respondents to have failed to raise their defences in the group proceeding and, thus, Anshun estoppel should not prevent them from pursuing those defences.
[36]Ibid [616].
[37]Ibid [617].
[38]Ibid [618].
[39]Ibid [623].
[40]Ibid [624]–[625].
[41]Ibid [625].
[42]Ibid [626].
It had also been contended that the failure of the plaintiff in the group proceeding to raise a particular claim meant that he would be estopped from raising that claim in a later proceeding and that, in so far as the group members were privies of the plaintiff, his failure had the consequence that the group members could not raise individual claims in a subsequent proceeding because they were privies of the plaintiff. The primary judge rejected those contentions. The primary judge accepted that the plaintiff in a group proceeding may be subject to an Anshun estoppel and that s 33ZB made express provision for the treatment of group members as if they were parties. However, the section had a limited operation and did not express any broader policy with respect to the preclusion of group members from bringing subsequent claims or defences.
The judge held that group members were not subject to estoppel as privies of the plaintiff because: (a) the group members did not authorise the plaintiff to represent them; (b) the plaintiff was not subject to fiduciary duties owed to group members; (c) the plaintiff is not required to consider the wider interests of group members; (d) the procedures contained in pt 4A do not adequately guard against collateral risks of representation; (e) pt 4A does not require group members to be informed of any preclusive effects of potential estoppels; (f) if group members and the plaintiff were held to be privies, there was a real risk that, in pursuing his or her own interests, the plaintiff might unwittingly preclude the future enforcement of other rights or obligations of far more value to group members; and (g) in so far as a plaintiff may not share the individual claim of a group member, the plaintiff may be prevented from pursuing the interests of a group member.[43]
[43]Ibid [572]–[580].
The judge also considered the matter on the contrary assumption that the plaintiff in the group proceeding was the common law privy of the respondents. Once more, he found no unreasonableness on the part of the respondents: (a) they had no control of the plaintiff in his conduct of the group proceeding and they had no entitlement to be heard or take part;[44] (b) the plaintiff was under no obligation to take into account their interests and could run the group proceeding in a way that was contrary to those interests;[45] (c) the plaintiff could not propound the individual respondents’ claims as they did not have the commonality required by s 33C;[46] and (d) to deny the respondents the ability to run their defences would be to derogate from their basic common law right to have an opportunity to present evidence and arguments.[47]
[44]Ibid [630]–[632].
[45]Ibid [633].
[46]Ibid [634].
[47]Ibid [635].
The judge also considered the matter on the hypothesis that group members were able to raise for directions the defences they now seek to propound.[48] Even in that situation, the judge held that Anshun estoppel would not apply as (a) even if group members had an entitlement to seek directions, the Court was under no obligation to give any directions for the determination of the individual claims;[49] (b) pt 4A neither expressly nor impliedly requires all individual claims to be determined in the group proceeding;[50] and (c) even if the opt out notice had provided an appropriate warning about Anshun estoppel, pt 4A does not treat group members as if they were parties except to the extent provided for in s 33ZB.[51] In reaching his conclusion, the primary judge disagreed with the reasoning of Judd J in Clarke v Great Southern Finance Pty Ltd (in liq)[52] and Croft J in Clarke v Great Southern Finance Pty Ltd (rec and mgr apptd) (in liq).[53] The primary judge considered that too much force should not be given to the opt out procedure: ‘there are myriad reasons why a group member may fail to opt out’.[54]
[48]Ibid [657].
[49]Ibid [660].
[50]Ibid [662].
[51]Ibid [663]–[664].
[52][2014] VSC 569.
[53][2014] VSC 516.
[54]Reasons [682]; see generally at [665]–[682].
Since the decision of the primary judge, and after the oral hearing in this Court, a judge in the Federal Court has adopted the approach favoured by the primary judge in preference to the two decisions just mentioned.[55] That case, like the other two, concerned applications for approval of a compromise in group proceedings. Naturally, the circumstances of each proceeding are very different. We have found the reasoning in each of these decisions to be helpful but have chosen, in light of the length of these reasons, not to canvass what was said in them in any detail.
[55]Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323 [199]–[247] (Murphy J).
Finally, the primary judge found that the respondents were not prevented from raising their pleaded defences by operation of the principles of abuse of process.[56]
[56]The primary judge did not make any finding that M+K were retained to deal with their clients’ individual claims: Reasons [716].
Proposed grounds of appeal
In its applications for leave to appeal, Timbercorp Finance identified five proposed grounds of appeal. These were that the primary judge erred:
1.in holding that Anshun estoppel does not apply to group members in group proceedings under pt 4A of the Act and thus is not engaged in relation to the respondents;
2.in holding that the applicant elected not to submit that the respondents’ failure to opt out from the group proceeding precluded them from running their defences;
3.in finding that, if applicable to group members in pt 4A group proceedings, Anshun estoppel did not preclude the respondents from running their defences;
Accordingly, one of the bases upon which the primary judge dismissed the contentions of Timbercorp Finance cannot be sustained: there was no barrier to group members bringing their unpleaded claims to the attention of the Court.
Are plaintiffs in a group proceeding confined to claims in which they have an interest?
The primary judge also held that, in a group proceeding, the jurisdiction of the Court not only depends on the existence of common issues of fact or law but is confined to the determination of them. Accordingly, it was not open to a plaintiff to advance claims available to particular group members but not available to the plaintiff himself.[179] In our opinion, that is also mistaken. It confuses the condition precedent to the exercise of jurisdiction in a group proceeding with the authority to resolve it. There is nothing in pt 4A that so confines the jurisdiction of the Court, and it would unnecessarily restrict the Part to import any such limitation.[180] Further, it is plain that s 33Q and the provisions that follow and supplement it contemplate the possibility of the involvement of group members in the group proceeding.
[179]‘Group proceedings cannot encompass idiosyncratic claims that lack even this minimum degree of commonality [the commonality identified as necessary to commence the proceeding in s 33C(1)]’: Reasons [465]; see also at [549], [580], [604], [625], [634]. ‘The defendants [Mr and Mrs Collins and Mr Tomes] had no power to influence the way the case was run, to determine what evidence was led or what issues were resolved. In fact, the plaintiff [in the group proceeding] could not have raised many of the defences sought to be raised by the defendants and particularly Mr Tomes by reason of the necessity for the claim to be common to seven group members including the plaintiff’: at [649] (emphasis added).
[180]See Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2001] VSC 372 [45]–[52] (Gillard J); Hall v Australian Finance Direct Ltd (No 3) [2007] VSC 366 [18]–[25] (Hollingworth J).
It follows that the second submission of Timbercorp Finance, in so far as it concerns the proper construction of the relevant statutory provisions, is correct. It is now necessary to consider the remaining submissions upon which Timbercorp Finance relied for the application of Anshun estoppel.
Was the relief sought in the group proceeding substantially the same as that underlying the individual defences?
Timbercorp Finance submitted that the relief sought in the group proceeding was substantially the same as that claimed in the individual defences, namely whether there was a liability under the loan agreements. However, even if this is accepted it does not advance the matter. Such a conclusion can be drawn only at an unhelpfully high level of generality. It is true that the relief sought in the group proceeding included avoidance of any liability to repay the loans, and that it is now sought to avoid that same liability. But that only reveals the potential for Anshun estoppel to arise. The correspondence in the underlying issue in dispute is not decisive. (It will be recalled that Timbercorp Finance does not assert issue estoppel, res judicata or statutory estoppel under s 33ZB.)
It is true, as Timbercorp Finance submitted, that there are connections between some of the claims made by the plaintiff in the group proceeding and some of the individual claims of Mr and Mrs Collins, and Mr Tomes. For the most part, however, those connections are not substantial or fundamental. Although Mr and Mrs Collins rely on the use of application moneys in the course of the Timbercorp Ltd business generally, that is in support of an argument about alleged departures from stipulated procedures, said to have meant that no loan was made to them at all. In the group proceeding, the same matter was relied on to falsify an alleged representation in the PDS. The underlying claims are quite different, despite the factual connection between them. In the case of the economic loss claim advanced by Mr and Mrs Collins, their reliance on the vulnerability of the scheme to the cash flows within the Timbercorp Group in order to establish their own vulnerability to economic loss is quite distinct from the group proceeding allegation of non-disclosure of the alleged vulnerability of the schemes to group cash flows. The unconscionability claim does intersect with that alleged non-disclosure, in so far as it alleges that Mr and Mrs Collins did not know of Timbercorp’s true financial position, but it is only one aspect of the claim and, more importantly, it depends on the state of the parties’ respective knowledge rather than any duty of disclosure or breach of such duty. The connection between those claims is therefore not substantial.
Mr Tomes relies on representations he says were made specifically to him. They bear a closer similarity to some of the representations made in the group proceeding, but the fact that he relies on explicit representations made to him personally, rather than representations said to be contained in the PDSs, indicates a critical difference in his claims. While the contents of the PDSs might bear upon his case, and there may be a factual overlap in that regard, his claim depends on other events. The connection is weaker in the case of his other claims. His ‘void ab initio’ argument depends, not on any representation, but on the construction of the relevant scheme documents and an alleged breach of an essential contractual term. The fact that, if the moneys were used as Mr Tomes alleges, this would also have gone to show the falsity of representations alleged to have been made in the group proceeding, does not reveal any fundamental connection between the claims. Again, they are based on quite different causes of action. In so far as s 601FC of the Corporations Act is concerned, only the provision affording relief is the same. The underlying breaches of trust that are alleged are distinct.
While the individual claims of the respondents are all directed at the same ultimate result, there are therefore very substantial differences between them. They reveal fundamentally different underlying legal foundations, and factual connections that are largely superficial. The closest connection is in the representations upon which Mr Tomes relies, but the factual foundation for the two claims is very different despite the connection. There is not a substantial correspondence or connectedness of subject matter of the kind alleged by Timbercorp Finance. It is consistent with our conclusions in this regard that Timbercorp Finance did not contend that any issue estoppel arose in respect of the respondents’ claims by virtue of their having been group members in the group proceeding.
Conclusion as to Anshun estoppel
The Anshun inquiry takes account of all the circumstances, and the submissions of Timbercorp Finance which we have considered above should not be treated in isolation. The circumstances need to be considered against the background that we have held that there were mechanisms available by which group members, including the respondents, could have brought their individual claims to the attention of the Court hearing the group proceeding and sought to have them resolved in that proceeding. We have also held that the Court would have had jurisdiction to deal with individual claims extending beyond the common questions.
It is to be recalled that Anshun estoppel is not to be applied according to some formula or mechanistically. As Ormiston JA said in Gibbs v Kinna, its application is based ‘not so much on legalities as upon practicalities’.[181] More recently, Australian courts have adopted the ‘broad merits-based’ approach described by Lord Bingham in Johnson v Gore-Wood & Co.[182]They have rejected any approach that may be characterised as ‘formulaic’ or ‘mechanistic’.[183] The failure to seek to use available mechanisms to bring the individual claims to the attention of the Court hearing the group proceeding does not, without more, suffice to give rise to an Anshun estoppel.
[181][1999] 2 VR 19, 20 [1].
[182]See, eg, Champerslife (2010) 75 NSWLR 245.
[183]Ibid 255 [52] (Giles JA).
In considering the question of unreasonableness, it is important to consider the opt out notice and the revised opt out notice that were sent to the parties.[184] Both notices described the plaintiff’s claim as arising from the ‘false, misleading, or deceptive representations to him and to group members in relation to the Schemes’. The group members were then warned as to the consequences that will flow if they do not opt out. The notices indicated that they would be bound by the outcome of the class action, stating ‘[i]f the class action is unsuccessful or is not as successful as you might have wished, you will not be able to make the same claim in any other proceedings’.[185] The notice contained nothing that would have warned a group member that, in addition to being bound by the determination of the plaintiff’s claim, they would be precluded from bringing their individual defences, if they did not apply, say, at a directions hearing to have their individual defences case managed as part of the group proceeding. While a finding of Anshun estoppel should not be made without ‘a scrupulous examination of all the circumstances’,[186] the content of the opt out notice bears very significantly on the reasonableness, or otherwise, of the course taken by the present respondents.[187]
[184]See the extracts at [49]–[52], [62]–[65] above. Opt out notices must be approved by the Court: the Act s 33Y.
[185]See [52], [62] above.
[186]Primus Telecommunications Pty Ltd v Kooee Communications Pty Ltd [2008] FCA 1027 [5]. See also Solak v Registrar of Titles (2011) 33 VR 40, 55 [73] (Warren CJ); Angeleska v Victoria [2015] VSCA 140 [199], [201] (Warren CJ, Tate JA and Ginnane AJA).
[187]Kelly v Willmott Forests Ltd (in liq) (No 4) [2016] FCA 323 [236]–[239]. See also Clarke v Great Southern Finance Pty Ltd (in liq) [2014] VSC 514 [25], [46].
The question of reasonableness must also be informed by considering what prejudice may have been caused to Timbercorp Finance as a result of the respondents not having taken the steps in the group proceeding which we have found were open to them as group members. In our opinion, the potential for prejudice is very low. Assuming that the respondents had made an application that their individual defences be case managed as part of the group proceeding, and that the trial judge had agreed to do so, it is highly likely, if not inevitable, that the individual defences would have had to be heard and determined separately from the hearing and determination of the common claims. It is necessary to recall the public interests that are advanced by Anshun estoppel. It is not in the public interest that a party be vexed more than once with the same claim. But Timbercorp Finance would still have had to respond to the individual claims either as part of the group proceeding or in a separate proceeding. The situation is much the same as that analysed in the Court of Appeal of England and Wales in Barrow v Bankside Agency Ltd.[188] In that case, Barrow brought his ‘portfolio selection’ claim in separate proceedings after the determination of the ‘negligent indemnity’ claim in which he was one of about 3000 co-plaintiffs. As Phillips J said in the Commercial Court, there was one issue that was common to all parties: ‘was the business of underwriting conducted with reasonable skill and care?’[189] It was[190]
in the interests of all parties, and designed to achieve a massive reduction in multiplicity of proceedings and saving of costs, that the common issue should be litigated in a single action. This could only be achieved if the individual claims that names might have against their members’ agents were not included in that action.
In the Court of Appeal, Sir Thomas Bingham MR pointed out that the defendant always had to face both claims. Either it faced the claim in the original proceedings in which Barrow was a co-plaintiff, or it faced it in a subsequent proceeding. Barrow was not ‘causing there to be two trials where there would have been one’.[191] He was not ‘exposing the defendant to an unnecessary series of trials’.[192] Accepting that the defendant may be dismayed by the emergence of the second claim, he said: ’but the claim would not have been other than unwelcome whenever presented’.[193]
[188][1996] 1 WLR 257.
[189]Barrow v Bankside Members Agency Ltd [1995] 2 Lloyd’s Rep 472, 478.
[190]Ibid.
[191]Barrow v Bankside Agency Ltd [1996] 1 WLR 257, 263.
[192]Ibid.
[193]Ibid.
The separate treatment of individual claims in group proceedings is familiar. As Murphy J explained in Kelly v Willmott Forests Ltd (in liq) (No 4):[194]
Ordinarily, courts take the approach of leaving the identification of class members’ individual issues or claims until after an initial trial in which the Court hears and decides the common issues and the applicant’s individual claims: Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26, [7] (Moore, Sundberg and Tracey JJ). After the decision on the common issues the Court can decide whether there are any individual claims and may give directions to deal with them in separate proceedings or within the framework of the class action. As Lindgren J said in Bright v Femcare Ltd (2002) 195 ALR 574, 580 [18]:
… ordinarily one would expect that, in an attempt to give effect to the legislative intention, a means will be sought, by case management techniques, to enable a representative proceeding to continue to the stage of resolution of the substantial common issues on the basis that after that stage is completed, an order under s 33N or directions under s 33Q will be made ...
[194][2016] FCA 323 [214].
In the present case, the respondents’ individual defences are no doubt unwelcome, but Timbercorp Finance is not materially worse off as matters now stand. Either it had to face the defences in the group proceeding or in a separate proceeding. It has yet to face them; it cannot be said that the conduct of the respondents is unfairly prejudicial to Timbercorp Finance. The written and oral submissions of Timbercorp Finance were directed at establishing that the Court had power under s 33Q to manage the individual claims and that the respondents should be estopped because they did not ask the Court to do so. But, as the courts have constantly repeated, the application of Anshun estoppel does not turn upon whether a matter could have been raised in an earlier proceeding but whether it was unreasonable of the party subsequently raising the matter not to have done so. Timbercorp Finance did contend that, if it did not succeed in its present application, it would be oppressed by having to face ‘over 1000 defended debt claims’. It may be accepted that such claims would have to be faced. But that of itself is not prejudice so as to make it unreasonable for the respondents not to have raised their claims in the group proceeding.[195]
[195]See also Reasons [616].
Further, it will be noticed that the analysis in the previous paragraph proceeds on the assumption that the judge in charge of the group proceeding would have agreed to case manage the individual defences of the respondents. But it is speculative to make that assumption. Although s 33Q confers jurisdiction on the Court to make such directions, it does not expressly confer standing upon group members to invoke the exercise of the jurisdiction. It is entirely possible that, if the respondents had attended the Court at a directions hearing, the Court would have refused to make orders directing that their individual defences be case managed as part of the group proceeding. The Court might have reasoned that it had enough to do managing, hearing and determining the common issues. During the trial and again on hearing of the appeal, counsel for Mr Tomes advanced what the primary judge described as a vivid example of all group members — and there were hundreds of them — attending the court on a directions day and asking that their individual claims be heard and determined as part of the group proceeding. Even if their requests were dealt with on the papers, their number would have the capacity to disrupt the orderly conduct of the group proceeding. The process would depend upon the exercise of a judicial discretion the outcome of which cannot be anticipated.
Australian courts have repeatedly refused to apply Anshun estoppel where the ability of the relevant party to participate in the earlier proceedings depended upon the favourable exercise of discretion by the court seized of those proceedings. It cannot be said that the route marked out for the respondents by Timbercorp Finance was as ‘tortuous’ as that facing the appellant in Ling.[196] Nor can it be said that the jurisdiction of the Trial Division of this Court to determine the individual defences as part of the group proceeding was debatable in the way the jurisdiction of the Federal Court was thought to be debatable in Meriton Apartments.[197] But there are good reasons for thinking that, if application had been made to the judge in charge of the group proceeding, it might well have been refused. In Champerslife, the Court held that the conduct of Champerslife Pty Ltd could not be said to have been unreasonable in not seeking joinder to the existing proceedings or in failing to bring its own proceedings and applying to have them joined to the existing proceedings in the Local Court.[198] As Giles JA said, the matter would have been complex: the prospects of a successful application for consolidation ‘were as doubtful as the prospects of a successful joinder application’.[199] In reaching that conclusion, he referred to the reasons in Meriton Apartments in which, he said, ‘it was observed that it would be strange if a litigant in the Federal Court was bound, at the risk of an Anshun estoppel, to invoke its accrued jurisdiction, when the Court can decline to exercise that jurisdiction’.[200]
[196]See [143] above.
[197]See [143] above.
[198](2010) 75 NSWLR 245.
[199]Ibid 255 [54].
[200]Ibid 255 [53].
Further, as was pointed out in Anshun itself, there may be good reasons why a party does not raise every relevant issue that arises out of the facts and circumstances that give rise to the claim that must be faced. In Anshun, Gibbs CJ, Mason and Aickin JJ referred to the fact that ‘[t]o require that the defendant always raise his cross-claim or set-off at the first available time could cause great inconvenience’.[201] They referred to those cases, such as Davis v Hedges,[202] where particulars for a claim for breach of warranty had not emerged at the time a claim for the price of goods or services was being prosecuted. In the present case, it was far from clear that the respondents were aware of the facts and circumstances that gave rise to their individual defences when they had to make a decision about whether to opt out.[203]
[201]See [142] above.
[202](1871) LR 6 QB 687.
[203]The primary judge did not, in terms, make findings of fact on this question: Reasons [115]–[116], [118], [128]–[129] (Mr and Mrs Collins). See also [84]–[85] above.
Timbercorp Finance submitted that the Court should take into account that the respondents had retained the same solicitors as the plaintiff had in the group proceeding and that they had retained those solicitors ‘to advance their individual issues as well as their common issues’. While the correspondence is far from clear, it is to be noted that Timbercorp Finance has not sought to impugn the primary judge’s statement that he had doubts whether those solicitors were ‘supposed to deal with clients’ idiosyncratic issues within the group proceeding’.[204] But in any event, the retention of solicitors to deal with both group and individual issues need not imply that those issues should all be brought forward in the same proceeding.
[204]Ibid [716].
In Anshun, the Court treated the possibility of there being inconsistent judgments as a sound basis for considering later proceedings vexatious of a party. Timbercorp Finance did not contend that the individual defences now propounded by the respondents might result in there being judgments inconsistent with that delivered in the group proceeding.[205]
[205]Ibid [626], [688].
We have already held that the connections between the claims advanced in the group proceeding and the individual claims of the respondents are not substantial or fundamental in nature. Any risk of inconsistent findings, undesirable as that is, must be viewed from that perspective.
It follows that, despite the potential for the respondents to have sought to raise their individual claims in the group proceeding, and despite the fact that the Court might, by reason of connections between those claims and the issues to be determined in the group proceeding, have heard and determined the individual claims, it was not unreasonable of the respondents, in all the circumstances, to defer reliance on their individual claims until such time as Timbercorp Finance sought to enforce the loan agreements against them.
Were the group members privies of the plaintiff?
The final submission of Timbercorp was that the respondents were privies of the plaintiff in the group proceeding and that the plaintiff was subject to Anshun estoppel which therefore also bound the respondents.
The analysis of pt 4A set out above[206] shows also that the group members in the group proceeding were not privies of the plaintiff in respect of unpleaded claims and defences, and that Tomlinson does not hold otherwise. The plaintiff was not the agent of the group members; nor was he their fiduciary. The group members had no control over the conduct by the plaintiff of the group proceeding.[207] They have no enforceable rights against him in the event that they consider that he has not advanced, or not properly advanced, their unpleaded claims. In advancing their amended defences, the group members are not claiming ‘under or through’ the plaintiff in the group proceeding. It is true that, by reason of the provisions of pt 4A, the plaintiff represented group members in that proceeding. And, to the extent of that representation, group members, in so far as they take its benefit, must also share in its burden. Nevertheless, the plaintiff did not represent group members in respect of their unpleaded defences and claims.
[206]See [183]–[187] above.
[207]The possibility of the Court giving group members the ability to make submissions in aid of the exercise of powers such as those conferred by s 33Q is not germane for present purposes.
If, contrary to our conclusions, the group members were privies of the plaintiff in that regard, it is necessary to consider whether the plaintiff in the group proceeding would himself be subject to Anshun estoppel of the type now asserted against Mr and Mrs Collins and Mr Tomes. In this context, it is necessary to consider the hypothetical scenario in which the plaintiff sought to advance the respondents’ individual defences at this point, perhaps in the course of a fresh group proceeding satisfying the criteria required by s 33C.
It will be recalled that we do not agree with the primary judge’s conclusion that the plaintiff was unable under pt 4A to advance in the group proceeding further claims of the type now sought to be relied upon by the respondents. Moreover, in this context the wording of the opt out notice has less relevance because the plaintiff was, as a party, not faced with any election. At the same time, however, the opt out notice suggested that the Court would only be resolving the identified common claims, and it can be assumed that, if the plaintiff had sought to raise further claims, a fresh opt out notice would have been required.
Nevertheless, while the plaintiff could have raised such claims as a matter of principle, it does not follow that the specific issues in question were necessarily able to be raised at the time of the group proceeding, or that it was unreasonable not to have raised them then.
In relation to Mr Tomes, it is significant that his claims depended in part on personal communications made to him. These were matters known to Mr Tomes at the time of the group proceeding. However, they raised matters distinct from the claims advanced on behalf of the group members, and there is no suggestion that they are claims that other group members could also have advanced. There was therefore no reason why these claims should have been advanced along with the common questions. The opt out notice framed the group proceeding as one about the common questions, and nothing else. In such circumstances, it was not the responsibility of the plaintiff to marshal other claims particular to individual group members and advance them on their behalf along with the common questions. It did not become his responsibility simply because M+K were aware of further claims upon which Mr Tomes wished to rely. Had the claims been advanced, their distinct nature means that in all likelihood their resolution would have been deferred until after resolution of the common questions. In the circumstances, it has not been shown that the plaintiff would be estopped were he now to seek to advance the further claims of Mr Tomes on his behalf.
The position regarding Mr and Mrs Collins is less clear. There is no evidence that the plaintiff was aware of the circumstances giving rise to their particular defences. Nor does the evidence indicate that M+K were aware of those circumstances while the group proceeding was being pursued. However, Timbercorp Finance contends that M+K could, and should, have advanced the claims of Mr and Mrs Collins via the plaintiff.
Documents upon which Mr and Mrs Collins’s defences were partly based were not obtained by them until after the recovery proceedings had been commenced. Mr and Mrs Collins by their notice of contention invite this Court to find that they could not have discovered the documents earlier. It is not necessary to resolve the issue in the notice of contention, because we have already held that no estoppel arises by virtue of the failure of Mr and Mrs Collins to advance their claims in the group proceeding. But the question of notice of the relevant documents bears on the present issue in a different way.
For present purposes, what matters is that, whether or not Mr and Mrs Collins could during the group proceeding have identified the defences now relied upon, it is contended that M+K could have done so. In that regard, Timbercorp Finance argues that M+K was provided with the relevant documents and could have identified the ‘no loan’ defence, in particular. It notes that the defences advanced by Mr and Mrs Collins are now raised by 195 defendants for whom M+K act in recovery proceedings.
The reasonableness of the plaintiff in not raising the defences in the group proceeding again depends on all the circumstances. It is significant that the Collins’s claims are not, as we have found, fundamentally connected with the claims that were advanced in the group proceeding. On the other hand, the plaintiff was responsible for advancing claims on behalf of the group and could have raised the claims now advanced by Mr and Mrs Collins on behalf of at least 195 persons. That consideration tends to negate the relevance of the comparative lack of connection between the existing common claims and the further claims. It suggests that the further claims could, and perhaps should, have been pursued as additional common claims.
However, even if all of the 195 defendants were group members, it has not been established when the further claims could, let alone should, have been identified. The reasonableness of the failure of the plaintiff, through M+K, not having pursued the claims would need to be determined by reference to the circumstances, including the stage reached by the proceeding, at that point. This Court is in a difficult position in this regard because there is a lack of findings by the primary judge, partly by virtue of the different view he took of the legislative provisions.[208] The matter seems primarily to have been argued on the basis of the knowledge of, or to be attributed to, Mr and Mrs Collins rather than the plaintiff. M+K itself did not lead evidence as to the position. But the onus rested on Timbercorp Finance, as the party alleging the estoppel.
[208]Reasons [726]–[731].
On balance, we consider that it has not been established by Timbercorp Finance that the plaintiff acted unreasonably in not identifying and advancing the Collins’s claims as part of the same proceeding.
In all the circumstances, it was not unreasonable for the plaintiff not to have raised the respondents’ further claims in the group proceeding. Even if the plaintiff and the group members were privies, the group members would therefore not be estopped from advancing those claims in a subsequent proceeding.
Abuse of process
Timbercorp Finance also contended that the respondents should be precluded from raising their present defences as to do so was to abuse the processes of the Court.[209] In making that contention, it referred to much the same considerations that it had relied upon in support of its claim that the respondents should be subject to Anshun estoppel.[210] It said that the application of the principles that prevent there being an abuse of process can preclude proceedings even where there is no estoppel.[211] Timbercorp Finance contended that the conduct of the respondents was unjustifiably oppressive to it and had the tendency to bring the administration of justice into disrepute. It would be unjust and oppressive for Timbercorp Finance now to have to face over 1000 defended debt claims[212] having already litigated their enforceability against those same defendants in the group proceeding.
[209]The same contention was dismissed by the primary judge: Reasons [723]–[725].
[210]Ibid [403], [723]–[725].
[211]Counsel referred to Tomlinson (2015) 89 ALJR 750, 757–8 [24]–[26].
[212]Reasons [82]–[84].
In Rogers v The Queen, McHugh J summarised the categories of abuse as follows:[213]
Inherent in every court of justice is the power to prevent its procedures being abused. Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court’s procedures are invoked for an illegitimate purpose; (2) the use of the court’s procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court’s procedures would bring the administration of justice into disrepute. Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court’s process.
[213](1994) 181 CLR 251, 286. This statement has been approved subsequently. See Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427, 452 [89] (Gummow ACJ, Hayne, Crennan and Bell JJ); PNJ v The Queen (2009) 252 ALR 612, 613 [3] (French CJ, Gummow, Hayne, Crennan and Kiefel JJ); Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256, 267 [15] (Gleeson CJ, Gummow, Hayne and Crennan JJ). In Oliver v Commonwealth Bank of Australia (No 2) [2012] FCA 755 [1]–[3], the Federal Court (Perram J) held that it was an abuse of process for plaintiffs who had not opted out of a group proceeding in which they were group members to maintain separate proceedings against the defendant in the group proceedings ‘dealing with substantially the same subject matter’ as that of the group proceedings. See also Clarke v Great Southern Finance Pty Ltd (in liq) [2014] VSC 569 [40].
Before the primary judge, Timbercorp Finance contended that, by raising their separate defences in the recovery proceedings, the respondents were using the procedures of the Court in a manner that (a) was unjustifiably oppressive of it and (b) would bring the administration of justice into disrepute.[214]
[214]Reasons [216].
In Kermani v Westpac Banking Corporation,[215] Robson AJA (with whom Neave and Harper JJA agreed) outlined a series of propositions drawn from the authorities where it had been contended that an abuse has arisen by reason of litigation that was said to be unjustifiably oppressive of a party. He said:[216]
[215](2012) 36 VR 130.
[216]Ibid 153–4 [97]. These factors were referred to again by this Court in Angeleska v Victoria [2015] VSCA 140 [154]–[159]. The High Court subsequently refused an application for special leave to appeal that decision: Angeleska v Victoria [2016] HCASL 5.
The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice. Regard may be had to:
(a)the importance of the issue in and to the earlier proceeding, including whether it is an evidentiary or ultimate issue;
(b) the opportunity available and taken to fully litigate the issue;
(c) the terms and finality of the finding as to the issue;
(d) the identity between the relevant issues in the two proceedings;
(e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceeding;
(f)the extent of the oppression and unfairness to the other party if the issue was relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.
Timbercorp Finance did not address argument at those principles; its case was put at a much higher level. It has not established to the satisfaction of the Court that, by maintaining their individual defences, the respondents are acting oppressively or otherwise bringing the administration of justice into disrepute. Timbercorp Finance had to meet the allegations contained in the present defences either as part of the group proceeding or in separate proceedings. Again, in some ways the present situation corresponds to that considered by Sir Thomas Bingham MR in Barrow v Bankside Agency Ltd.[217] The respondents are not causing there to be two trials where there would have only been one. They are not exposing Timbercorp Finance to an unnecessary series of trials. Timbercorp Finance is no worse off as matters stand than if the respondents had sought to introduce their individual defences into the group proceeding. Their claims are unwelcome, but they would have been unwelcome whenever they were advanced. Timbercorp Finance has yet to meet those claims. The defences now raised are ‘unadjudicated’. It is not oppressive that Timbercorp Finance must meet them now.
[217][1996] 1 WLR 257.
Conclusion
In our opinion, leave to appeal should be granted and the appeal should be dismissed.
399–406 (citations in original).
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