Timothy Boase and Jenny Lee Boase as trustee for the Boase Family Trust v Brook
[2015] WASC 23
•28 JANUARY 2015
TIMOTHY BOASE AND JENNY LEE BOASE as trustee for the Boase Family Trust -v- BROOK [2015] WASC 23
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 23 | |
| Case No: | CIV:2061/2013 | 23 DECEMBER 2014 | |
| Coram: | CHANEY J | 28/01/15 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Action not to proceed with current representative | ||
| B | |||
| PDF Version |
| Parties: | TIMOTHY BOASE AND JENNY LEE BOASE as trustee for the Boase Family Trust ALAN BROOK |
Catchwords: | Practice and procedure Representative proceedings Whether properly commenced Whether action should continue as representative proceedings Representative not legally represented Defence pleading that representative a concurrent wrongdoer |
Legislation: | Civil Liability Act 2002 (WA) Legal Profession Act 2004 (WA) Rules of the Supreme Court 1970 (NSW) Rules of the Supreme Court 1971 (WA), O 18 r 12 Trade Practices Act 1974 (Cth) |
Case References: | Arakella v Paton [2004] NSWSC 13; (2004) 60 NSWLR 334 Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398 Ekaton Corp Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018 Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3) [2014] VSC 340 Shaw v Real Estate Board of Greater Vancouver (1973) 36 DLR (3d) 250 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
AND
ALAN BROOK
Defendant
Catchwords:
Practice and procedure - Representative proceedings - Whether properly commenced - Whether action should continue as representative proceedings - Representative not legally represented - Defence pleading that representative a concurrent wrongdoer
Legislation:
Civil Liability Act 2002 (WA)
Legal Profession Act 2004 (WA)
Rules of the Supreme Court 1970 (NSW)
Rules of the Supreme Court 1971 (WA), O 18 r 12
Trade Practices Act 1974 (Cth)
Result:
Action not to proceed with current representative
Category: B
Representation:
Counsel:
First Plaintiff : In person
Defendant : Ms W F Gillan
Solicitors:
First Plaintiff : In person
Defendant : Tang Legal
Cases referred to in judgment:
Arakella v Paton [2004] NSWSC 13; (2004) 60 NSWLR 334
Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398
Ekaton Corp Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018
Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3) [2014] VSC 340
Shaw v Real Estate Board of Greater Vancouver (1973) 36 DLR (3d) 250
- CHANEY J:
Introduction
1 The question before me for determination is whether or not these proceedings have been properly commenced as a representative action, or alternatively, whether they should continue as representative proceedings.
The history of the proceedings
2 On 4 July 2013, proceedings were commenced against the defendant by Timothy Boase and Jenny Lee Boase in their capacity as trustees of the Boase Family Trust (First Plaintiff). The writ contained a generally indorsed claim and was prepared by Timothy Boase (Mr Boase) in person. It claimed damages of $74,418 and other relief for various breaches of the Trade Practices Act 1974 (Cth) and for breaches of contract and negligence.
3 Mr Boase had previously attempted to file a writ on 26 June 2013, which described the plaintiff as 'Timothy Boase and Jenny Lee Boase as trustees for the Boase Family Trust and the other persons named in the schedule'. The writ attached a schedule naming 25 plaintiffs and signed by each of them. That writ had been rejected by the Central Office of the Court in the absence of a clear basis upon which Mr Boase had the authority to issue the writ on behalf of all of the named plaintiffs.
4 The writ issued on 4 July 2013 (original writ) was described by Mr Boase, in an affidavit dated 15 July 2013, as an 'interim' writ designed to 'alleviate any possible statute of limitations issues which may or may not arise in the upcoming proceedings'.
5 On 15 July 2013, Mr Boase also filed a notice of motion seeking to amend the writ. The amendments to the writ were to add to the title of the action 'other parties/persons named in the first schedule' described as 'plaintiffs', insert a recital that Mr Boase 'pursuant to O 4 r 3 and O 18 r 12(1) sues the defendant in a representative capacity as the representative of the persons/parties recorded as plaintiffs in the first schedule herein', amend the damages claim to $1,276,278, amend the claim for relief to add a claim for loss of use of monies, and add a schedule naming 25 plaintiffs (Represented Plaintiffs) including the plaintiff in the original writ.
6 On 1 August 2013, the Master granted leave to amend the writ in terms of Mr Boase's motion.
7 On 5 August 2013, Mr Boase filed a statement of claim, and the defendant entered a conditional appearance on 15 August 2013. The defendant, Mr Brook, is a solicitor and the appearance nominated his firm, Brook Legal, as the solicitors for the defendant.
8 On 29 August 2013, the defendant issued a chamber summons seeking to strike out the writ. An affidavit in support of the application sworn by Mr Brook asserted that Mr Boase 'should not be granted standing to represent' 24 of the plaintiffs (that is all 'plaintiffs' except the First Plaintiff), that the action was time-barred and that there was a divergence of interest between Mr Boase and the 24 other plaintiffs by reason of Mr Boase's potential conflict of interest.
9 That application was dealt with by the Master on 28 November 2013, but was not finally resolved. The Master considered that the position might become clearer after a defence had been filed, and he adjourned the summons sine die.
10 On 23 September 2013, Mr Brook appointed Jackson McDonald to act as his solicitors in place of Brook Legal. On the same day, a further affidavit by Mr Brook was filed in support of the application to strike out the writ.
11 On 31 October 2013, a notice of appointment of solicitor was filed by Gadens Lawyers (Gadens) stating that the firm 'act[s] for the plaintiff in this matter'. Gadens subsequently clarified in correspondence with Mr Brook's solicitors that it only acted for the First Plaintiff and not for the Represented Plaintiffs. Nothing further appears to have occurred on the file until Gadens filed a substituted statement of claim which stands as the current pleading. I note in passing that the substituted statement of claim was headed differently from the amended writ in that, instead of 'the other parties/persons named in the first schedule - Plaintiffs', it referred to 'the class of plaintiffs particularised in schedule 1 to the substituted statement of claim - Represented Plaintiffs'. It stipulated that it was filed on behalf of the first plaintiff, being Mr and Mrs Boase as trustees for the Boase Family Trust.
12 A defence was filed on 31 January 2014, and a reply on 13 May 2014.
13 On 3 September 2014, Tang Legal filed a notice of change of solicitors advising that it now acted for Mr Brook in place of Jackson McDonald.
14 On 4 September 2014, I made directions referring the matter to mediation. Shortly afterwards, on 12 September 2014, Mr Boase filed a notice of intention to act in person in place of Gadens. As a result of that development, the mediation did not proceed, and the defendant sought orders that the proceedings be dismissed in so far as they purport to relate to a representative action, or alternatively, that they not continue as a representative action. There is substantial overlap between the original application by the defendant to strike out the writ, which stands adjourned by the Master, and the orders now sought that the action not proceed as a representative action.
The capacity in which Mr Boase acts
15 It is apparent from the indorsement on the writ, and from Mr Boase's submissions, that the capacity in which he seeks to bring these proceedings is as a representative pursuant to O 18 r 12(1) of the Rules of the Supreme Court 1971 (WA). That rule provides:
12. Representative proceedings
(1) Where numerous persons have the same interest in any proceedings, not being such proceedings as are mentioned in rule 13, the proceedings may be begun, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them.
17 The defendant contends that, for reasons which will be discussed below, Mr Boase does not have the same interest in the proceedings as the represented plaintiffs, or if he does, this is a case in which the court should 'otherwise order' that the action not be continued as a representative action.
The plaintiff's claim
18 The claim arises as a result of investments by the First Plaintiff and the represented plaintiffs (together the investors) in a failed proposed property development (the Baldivis scheme) in respect of which each of the investors lost their deposit and what is described as an 'expression of interest fee'. The fee paid was pursuant to the investors' contracts to purchase subdivided lots as part of the Baldivis scheme.
19 The substituted statement of claim pleads the following facts.
20 The defendant was a legal practitioner who acted for various companies associated with the Baldivis scheme. One of those was The Project at Baldivis Pty Ltd (TPAB), which had been established for the primary purpose of acquiring certain land in Baldivis. In February 2007, TPAB, or a related company, Frasers The Project Managers Pty Ltd (FTPM), for whom Mr Brook also acted, published documents entitled 'expression of interest' in relation to the Baldivis scheme, which involved the subdivision of the land in Baldivis into 40 lots. Neither TPAB nor FTPM owned the land at that time. However, on 1 March 2007, TPAB entered into a contract to purchase the land for $3,040,000 from a company called R&Z Developments Pty Ltd (R&Z), which, in turn, had entered into a contract on 10 February 2007 to purchase the land from a Mr and Mrs Wright for $2,300,000.
21 Between early March 2007 and late June 2007, the members entered into expressions of interest and paid to FTPM an expression of interest fee of $6000 in relation to each lot.
22 On 26 April 2007, FTPM, with the actual or constructive knowledge of the defendant, sent an e-mail to the investors attaching a letter from the defendant containing certain legal advice concerning the Baldivis scheme, and offering to act, at a reduced cost, for both TPAB and the investors in each of their prospective land sales contracts. It is said that at certain specified dates between 14 May 2007 and 30 August 2007, the defendant knew or ought to have known, that there was a substantial risk that the Baldivis scheme was an unlawful managed investment scheme.
23 Between 25 June and 26 June 2007, each of the investors entered into contracts to purchase one or more of the proposed subdivided lots (Proposed Lot Contracts), and shortly afterwards paid a deposit of $37,000 per lot. The deposits were paid into the defendant's trust account. Each of the Proposed Lot Contracts nominated the defendant to act as the investors' legal representative. Alternatively, it is said that there was an implied retainer between the investors and the defendant, arising from the nomination in the Proposed Lot Contracts. As a result, the defendant attended certain meetings with the investors and gave them both oral and written legal advice.
24 It is then pleaded that the defendant, having given false advice to the investors, paid Mr and Mrs Wright the investors' funds from the trust account, as part of the settlement of the purchase by R&Z. It is said that by reason of certain matters pleaded, the defendant did not have authority to pay the trust money to the Wrights, and thereby breached various duties under his retainer or, alternatively under the Legal Profession Act 2004 (WA). It is pleaded that he acted for the investors whilst having a conflict of interest, and also breached his duty to exercise the level of care and skill expected of a reasonably competent solicitor. The various manners of the breach are particularised in the pleading.
25 On 28 August 2007, the sale of the land from R&Z to TPAB was settled, and a mortgage was registered over the land. Subsequently, as a result of actions by the mortgagee, the land was sold and the entire proceeds were applied to TPAB's debt to the mortgagee. As a result of action by the Australian Securities and Investments Commission (ASIC), TPAB and FTPM were both wound up by the Federal Court, with the result that the investors lost their deposits and expression of interest fees. The writ claims damages comprising those amounts totalling $1,276,278, and the lost opportunity to apply funds to alternative investments.
The defence
26 The defence contends that if the first plaintiff suffered damage, then Mr Boase contributed to that damage by his negligence. That negligence is said to consist of the first plaintiff investing in the Baldivis scheme notwithstanding that Mr Boase, as an employee of FTPM, knew ASIC was concerned the Baldivis scheme may constitute an unregistered managed investment scheme.
27 It is further pleaded that the claim is an apportionable claim for the purposes of the Civil Liability Act 2002 (WA) and that various parties associated with the Baldivis scheme, including Mr Boase, are concurrent wrongdoers, limiting the defendant's liability to the extent of his responsibility for the damage. The particulars assert that Mr Boase, as an employee of FTPM, was aware of both ASIC's concerns about the Baldivis scheme, and that the members' funds did not have security. Further, it is asserted that Mr Boase was aware that TPAB was purchasing the land from R&Z, R&Z being controlled by one of the other concurrent wrongdoers in these proceedings. The defence alleges that Mr Boase induced the investors to sign the defendant's letter authorising the release of the funds, thereby breaching his duty of care owed to the investors to disclose 'pertinent information'.
28 The defence otherwise consists of a number of denials or non-admissions of the matters pleaded in the statement of claim, including a denial that the investors retained the defendant as their legal representative. The defendant further pleads that the plaintiff's claim is time-barred.
Have the proceedings been properly begun as representative proceedings?
29 Order 18 r 12(1) permits proceedings to be begun by a representative of persons who 'have the same interests' in the proceedings. In Carnie v Esanda Finance Corp Ltd,1 the High Court considered an equivalent provision of the Rules of the Supreme Court 1970 (NSW). The Court identified that the 'obvious purpose' of the rule was to facilitate the administration of justice by enabling parties having the same interests to secure a determination in one action rather than in separate actions. Mason CJ, Deane and Dawson JJ said:2
It has been suggested that the expression 'same interest' is to be equated with a common ingredient in the cause of action by each member of the class. In our view, this interpretation might not adequately reflect the content of the statutory expression. It may be it extends to a significant common interest in the resolution of any question of law or fact arising in the relevant proceedings. Be that as it may, it has now been recognised that persons having separate causes of action in contract or tort may have 'the same interest' in proceedings to enforce those causes of action. (Footnotes omitted)
30 McHugh and Brennan JJ made observations to the same effect.3
31 Toohey and Gaudron JJ considered that the observations of Bull JA in Shaw v Real Estate Board of Greater Vancouver4 were apposite to the rule under consideration. Bull JA said:
It appears to me that the many passages uttered by judges of high authority over the years really boil down to a simple proposition that a class action is appropriate where if the plaintiff wins the other persons he purports to represent win too, and if he, because of that success, becomes entitled to relief whether or not in a fund or property, the others also become likewise entitled to that relief, having regard, always, for different quantitative participations.
32 In this case, it does not necessarily follow that success by the first plaintiff means that all of the other investors are entitled to the same relief against the defendant. It is quite possible that the evidence might disclose differences between investors as to the basis or nature of the defendant's retainer. However, the case as pleaded in the substituted statement of claim does not identify any distinction in the material facts relied upon to establish each investor's causes of action. It is quite clear that, in the pleading, there are numerous questions of law or fact arising in the proceedings in which all of the investors have a common interest. Those questions include whether the defendant gave legal advice to investors, the state of the defendant's knowledge, the nature of the relationship between the defendant and the various companies involved in transactions related to the development, the existence and nature of any duties owed by the defendant as a result of his nomination as purchaser's representative under the Proposed Lot Contracts, the authority to pay the monies held in trust to the Wrights, and no doubt other questions.
33 As Mason CJ, Deane and Dawson JJ observed in Carnie, once it is established there are numerous parties with the requisite commonality of interests, representative proceedings may be commenced under O 18 r 12 subject only to the exercise of the Court's power to order otherwise.5 I am satisfied that these proceedings were properly begun under O 18 r 12.
34 Having reached that conclusion, it is necessary to turn to the separate question of whether or not the Court should exercise its discretion to order that the action not be continued as representative proceedings.
Should the action be continued as representative proceedings?
35 There are a number of factors to be borne in mind in exercising the discretion as to whether or not these proceedings should be carried on by a representative of a class of persons.
36 First, as the Court observed in Carnie, the purpose of the rule is to facilitate the administration of justice by enabling determination of one action rather than separate actions. As the cost of litigation notoriously rises, it is increasingly apparent that O 18 r 12 can assist in the delivery of efficient justice. The individual investors' losses in this action range between $43,000 and $172,000 and involve some degree of complexity. Regrettably, it is likely to be uneconomical for any of the individual investors, or at least those (of whom there are approximately 18) who contracted to purchase only a single lot, and thus paid a total of $43,000, to undertake separate actions. There is thus a powerful argument for permitting the proceedings to continue as a representative action.
37 There are, however, difficulties. The represented members are not presently parties to the action.6 As such, they are not liable for costs should the action fail.7 Nor are they required to give discovery, unless the defendant were to seek third party discovery, a process which might involve significant expense. They therefore have the benefit of an action being run which can result in the same benefits as if they were plaintiffs, but without the liabilities attached to a party to proceedings. That has the potential to be unfair to the defendant.
38 Of particular significance in the present case is the fact that the representative plaintiffs no longer have legal representation, and are represented by Mr Boase, who the defence accuses of certain wrongdoing. As Brennan J observed in Carnie, because of the flexible utility of a representative action, judicial control of its conduct is important.8 His Honour said:
The self-proclaimed carrier of a litigious banner may prove to be an indolent or incompetent champion of the common cause in the courtroom. As Vinelott J said in the course of his judgment in Prudential Assurance Co Ltd v Newman Industries Ltd, the court must be satisfied that:
'the issues common to every member of the class will be decided after full discovery and in the light of all the evidence capable of being adduced in favour of the claim.'
I would add that if, for any reason, the court is not satisfied that the interests of the absent but represented class are being properly advanced, the court should exclude the represented persons from the action. That power can be exercised at any time before the judgment is perfected. (Footnotes omitted.)
39 In Arakella v Paton,9 Austin J said in relation to the New South Wales equivalent of O 18 r 12:
The Court places particular reliance, in representative proceedings, upon the lawyers who act for the representative. It has been observed that, in proceedings under Pt IVA of the Federal Court of Australia Act 1976 (Cth), the lawyers acting for the representative have an obligation 'to conduct the proceedings on behalf of [the representative] in a way consistent with the interests of members of the representative group' (King v AG Australia Holdings Ltd (2002) 121 FCR 480 at 489 [27], per Moore J), and that where the interests of the representative do not coincide with the interests of the members of the group, it is incumbent on the lawyers for the representative to put before the Court all relevant matters (Lopez v Star World Enterprises Pty Ltd (1999) ATPR ¶41-678 at 42,670, per Finkelstein J). Those propositions are applicable, in my view, to representative proceedings under Pt 8, r 14.
40 In Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3),10 Ferguson J considered the provisions of the Supreme Court Act 1986 (Vic) dealing with what are referred to as group proceedings. Group proceedings had been commenced by a company against three public companies in which the nominated plaintiff had a small shareholding. The solicitor for the plaintiff in each case was the sole shareholder and director of the plaintiff company. It was clear that the solicitor, a Mr Elliott, stood to earn significant legal costs from the conduct of the action. Although she rejected the contention that the proceedings were an abuse of process, Ferguson J made an order that the proceedings not be allowed to continue as group proceedings for so long as Mr Elliott was acting for the plaintiff. Her Honour said:11
Whether it is good or bad, the reality is that group proceedings are lawyer driven. They will not, for that reason, be brought to a halt. Nevertheless, it does seem to me that the risks associated with entrepreneurial lawyers acting in group proceedings, as identified by Finkelstein J, are exacerbated here where the plaintiff and the solicitor are not independent of one another. I have a concern that, while MCI is the plaintiff and Mr Elliott its solicitor, despite their best intentions, there is a risk (which cannot be dismissed as remote) that self-interest will dominate over the interests of group members. Ordinarily, lead plaintiffs have the benefit of independent advice about what they should or should not do taking into account the interests of group members. Ordinarily, the solicitor is not facing any possibility of adverse costs orders that will affect them if the plaintiff fails in expensive interlocutory disputes or does not succeed at trial. Mr Elliott is simply not in a position to give detached advice to MCI. (Footnotes omitted.)
41 The self-interest which concerned Ferguson J, namely the interest in receiving fees for the action, is not present in this case. There are, however, matters of serious concern in Mr Boase acting as the representative of the represented plaintiffs. First, Mr Boase is not a legal practitioner. The represented plaintiffs will not have the benefit of independent (or indeed any) legal advice.
42 Secondly, decisions in relation to the conduct or settlement of the action necessarily involve an assessment of the merits of both the claim and the defence. A significant issue in the defence is the question of contribution by alleged concurrent wrongdoers, including Mr Boase. It is clear, from his submissions during the course of the hearing of this application, that Mr Boase strongly rejects any allegation of wrongdoing. Whether or not that rejection is justified, it is inevitable that decisions made by Mr Boase, which will affect the represented plaintiffs, will be influenced by his own strongly held views rather than by any independent assessment of the relevant evidence.
43 Thirdly, Mr Boase will inevitably be a witness in the proceedings. As representative of the represented plaintiffs, it is also inevitable that he will be responsible for the submission of witness statements by represented plaintiffs, and the submission of documents for hearing. There is a strong prospect that the preparation of evidence for trial will be influenced by Mr Boase's personal interests and views as to his own lack of culpability. The process of preparation of evidence for hearing, or in relation to negotiations for settlement, will not be attended by objective and independent advice.
44 Mr Boase submitted affidavits by two represented plaintiffs, Mr Hawkes and Mr Payne. Each said that they had been approached by Mr Boase to become a member of a committee to represent the other represented plaintiffs in this action. They said that they had been advised by Mr Boase that their role would be to attend hearings and trial, and report back to the other represented plaintiffs as to developments in the action and any concerns as to its conduct. They said that Mr Boase had explained that there must be an uneven number of persons on the committee, and that they should each be independent in their role as a committee member. There was otherwise no information before the Court as to the constitution, nature or functions of the proposed committee. From Mr Boase's submissions at the hearing, it is apparent that he proposed to be a member of the committee, and that it would comprise three members, being himself, Mr Hawkes and Mr Payne.12 There is insufficient information to conclude that the concerns as to the need for independent advice and representation, which I have expressed above, are alleviated in any way by Mr Payne and Mr Hawkes' willingness to serve on a committee.
45 In the circumstances, I do not consider it appropriate that the action should continue in its present form with the first plaintiff as representative of the represented plaintiffs. That conclusion raises the question as to how the action might now proceed. There are several possibilities.
46 One is that the members, other than the First Plaintiff, may choose to apply to become plaintiffs.
47 A second is that the represented plaintiffs may join together to appoint a solicitor with a view to the action continuing with all of the represented plaintiffs, other than the First Plaintiff, being represented in the proceedings. If that course is proposed, consideration will be need to be given to the manner in which the defendants' concerns as to matters such as costs and discovery are to be resolved.
48 A third is that the represented plaintiffs may choose not to participate further in the proceedings. That may raise questions as to whether the action should continue in this court or be remitted to a lower court in view of the amount in issue.
49 There may be other possible ways forward. I propose to direct that a copy of these reasons be provided to each of the represented plaintiffs so that they may consider their position. A directions hearing will then be listed to enable the represented plaintiffs and the parties to make submissions as to the ongoing conduct of the action.
1Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398.
2Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398, 404.
3Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398, 427 (McHugh J), 408 (Brennan J).
4Shaw v Real Estate Board of Greater Vancouver (1973) 36 DLR (3d) 250, 254.
5Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398, 405.
6Ekaton Corp Pty Ltd v Shahin Enterprises Pty Ltd [2003] NSWSC 1018 [17].
7Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398, 420 (Toohey & Gaudron JJ).
8Carnie v Esanda Finance Corp Ltd [1995] HCA 9; (1995) 182 CLR 398, 408.
9Arakella v Paton [2004] NSWSC 13; (2004) 60 NSWLR 334 [61].
10Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3) [2014] VSC 340.
11Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3) [2014] VSC 340 [63].
12 ts 64 - 65 (23 December 2014).
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