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Federal Court of Australia |
PRACTICE and PROCEDURE - Application for security for costs - applicants resident in New Zealand - effect of order-in-council extending operation of Reciprocal Enforcement of Judgments Act 1934 (NZ) to the Commonwealth of Australia - undertaking accepted from applicants not to dispose of, encumber or otherwise deal with property of applicants - security for costs not awarded.
Federal Court of Australia Act 1976 (Cth) ss 33C, 33N, 33P and 33Z
Building Units and Group Titles Act 1980 (Qld) s 49
Zhang v The Minister for Immigration [1993] FCA 489; (1993) 45 FCR 384 referred to
Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723 considered
Connop v Varena Pty Ltd [1984] 1 NSWLR 71 considered
Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304 referred to
Kent Heating Ltd v Cook-On Gas Products Pty Ltd (1984) 59 ALR 277 considered
JAMES WONG AND JANICE WONG AND ROY JULIAN FLIGHT (for and on behalf of themselves and as representatives of the group referred to in the application) v SILKFIELD PTY LTD ACN 070 910 744
No QG 167 of 1997
SPENDER J
BRISBANE
16 JANUARY 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 167 of 1997 |
|
BETWEEN: | James WONG and Janice WONG and Roy Julian FLIGHT (for and on behalf of themselves and as representatives of the group referred to
in the application)
Applicants |
|
AND: | SILKFIELD PTY LTD ACN 070 910 744
Respondent |
|
JUDGE(S): | SPENDER J |
| DATE OF ORDER: | 16 JANUARY 1998 |
| WHERE MADE: | BRISBANE |
THE COURT ORDERS THAT:
1. The notice of motion filed 5 December 1997 be dismissed.
2. The costs of the motion filed 5 December 1997 be the applicants' costs in the principal proceedings.
3. The motion filed 8 December 1997 by the applicants be adjourned to 11 am on 4 February 1998, and the costs of that motion be reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| QUEENSLAND DISTRICT REGISTRY | QG 167 of 1997 |
|
BETWEEN: | James WONG and Janice WONG and Roy Julian FLIGHT (for and on behalf of themselves and as representatives of the group referred to
in the Application)
Applicants |
|
AND: | SILKFIELD PTY LTD ACN 070 910 744
Respondent |
JUDGE(S):
SPENDER J DATE: 16 JANUARY 1998 PLACE: BRISBANE
There is before the court a notice of motion filed on behalf of the respondent in the principal proceedings, Silkfield Pty Ltd, (`Silkfield' or `the vendor' or `the respondent'). The motion is dated 5 December 1997, and raises important questions, in the factual circumstances of the case, concerning the appropriateness and utility of representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (Cth) (`the FCA Act'). The motion seeks a declaration that it is not open to the applicants (`the representatives', or `the purchasers') to commence representative proceedings under Part IVA of the FCA Act.
The motion also seeks that within fourteen days the applicants file and serve an amended application and statement of claim limited to the matters in issue between the applicants and that the proceedings be thereafter transferred to the Supreme Court of Queensland at Brisbane. The respondent also seeks an order pursuant to s 86A of the Trade Practices Act 1974 (Cth) (`the TPA') transferring these proceedings to the Supreme Court of Queensland at Brisbane.
In the alternative, Silkfield seeks an order pursuant to s 33N of the FCA Act that the proceedings no longer continue under Part IVA of that Act, and further that the applicants and the members of the group provide the respondent security for costs. A strike-out application has also been made as part of the motion filed on behalf of the respondents.
A second notice of motion was also made returnable on 16 December 1997, the same day as the motion filed on behalf of Silkfield. That motion was filed by the applicants in the principal proceedings on 8 December 1997 seeking, amongst other things, an order pursuant to s 33J of the FCA Act, fixing a date before which a group member may opt out of the representative proceedings and other orders pursuant to Part IVA of the Act relating to the opting out procedures in the proceedings as currently framed.
The applicants' motion assumes that the proceedings were properly constituted as representative proceedings. It was accepted by counsel on behalf of both parties that it was appropriate to determine whether the proceedings are properly constituted as representative proceedings before dealing with the matters the subject of the representative's motion.
The key issue raised by the motion filed on behalf of Silkfield is whether this is properly constituted as a representative proceeding.
Silkfield is a developer and vendor of 166 strata title lots in a building at Broadbeach on the Gold Coast. In brief, it is alleged by the applicants in these proceedings that the respondent and its agent, Skye Court Pty Ltd (`Skye'), (a real estate agent operating on the Gold Coast and in Auckland, New Zealand) engaged in misleading and deceptive conduct in respect of the sale of lots in the building and gave inaccurate written statements purported to be made pursuant to s 49 of the Building Units and Group Titles Act 1980 (Qld) (the `BUGT Act'). The applicants accordingly seek a declaration that the group members have an accrued right as at the date of the application to avoid their respective contracts of sale and that they have avoided their contracts of sale.
There are at present three named applicants in the statement of claim and application who are purchasers of four units in the building: Mr James Wong, Ms Janice Wong, and Mr Roy Julian Flight. Mr and Ms Wong contracted to purchase three units in December 1996 and Mr Flight contracted to purchase one unit in March 1996. Those three applicants have brought the application for and on behalf of themselves and as representatives of the group members referred to in the application. The group members are described as follows:
all persons who entered into contracts to purchase lots in a proposed building to be called "The Phoenician North Tower" from the respondent by or through the agency of Skye Court Pty Ltd ACN 011 025 586 prior to the date of registration of the plan in respect of the building, and who were provided by the respondent with a statement purportedly made pursuant to s 49 of the Building Units and Group Titles Act 1980 (Qld).
The group members are therefore purchasers of other residential lots pursuant to individual contracts with Silkfield. The residential lots in the building were sold to both Australian and overseas buyers. As appears from Annexure A to the statement of claim (filed on 24 October 1997), all but one of the proposed group members reside in Auckland. The only exception to that is a person who signed a contract and whose residence is given as Hong Kong. Eighty-seven of the 124 purchasers of residential lots are New Zealand residents.
Clause 3(a) of the building contract provides for completion of the contract within fourteen days after notice from the vendor to the purchasers that the relevant building units plan had been registered. On 26 September 1997 the building unit plan for the building was registered. On 29 September 1997 Silkfield gave notice to the purchasers to settle pursuant to that clause by 14 October 1997. On 14 October 1997 the applicants and other group members did not settle their contracts with Silkfield.
By 14 October 1997, Silkfield had entered into 124 contracts for residential lots and 3 contracts for commercial lots. Each of those contracts settled, except for contracts relating to 41 lots. Of the contracts for the 41 lots that did not settle, 39 lots were contracted to 18 purchasers who comprised the identified members of the group referred to in this representative action.
On 17 October 1997 Silkfield issued 35 Supreme Court writs against each of the applicants and thirteen group members (the purchaser defendants) claiming specific performance of the individual contracts. Four writs were not issued because those properties were resold. Of the 35 contracts that remain there are a further 8 contracts where the action for specific performance by the respondent will not proceed because the vendor asserts that repudiation of the purchaser has now been accepted and the property has already been sold or contracted to be sold to somebody else. As a result there were still 27 writs for specific performance on foot which have not been amended and in respect of which there is a present intention by the vendor to pursue. It is likely, however, that specific performance will not be pursued in all of those matters, damages alone being the remedy that will ultimately be sought in some of those matters. It is not possible on the present material before me to determine with precision the number of such matters.
On 20 October 1997, Messrs Short Punch and Greatorix, the solicitors for Silkfield, wrote to the purchaser defendants' solicitor, Wendy Cull, requesting her firm to accept service on behalf of those persons or purchasers who resided in New Zealand. Two days later, Silkfield's solicitors sent to Ms Cull a further letter enclosing a copy of the sealed writ of summons and requesting her to accept service of the writ on behalf of the purchaser defendants. On that same day Ms Cull advised Short Punch & Greatorix that her firm would not accept service of the writ of summons.
On 24 October 1997 the applicants filed in the Queensland District Registry of the Federal Court their application and statement of claim in these proceedings, as representative proceedings pursuant to Part IVA of the FCA Act.
The statement of claim appears to be the result of careful and detailed drafting. It is relevant to note that the decision to file the proceedings in the Federal Court was made on 14 October 1997 and the writs for specific performance were issued on 17 October 1997. I mention those dates particularly because I had initially thought that the Federal Court proceedings could be disposed of by the transferring of them to the Supreme Court on the basis that because the Supreme Court proceedings were first in time, comity between our Courts should require that the applicants in the Federal Court proceedings should not be permitted after the commencement of proceedings in the Supreme Court to "forum shop" by bringing belated proceedings in this court.
Fencott v Muller (1983) 152 CLR 570 resolved the unedifying spectacle of forum shopping in misrepresentation cases between vendor and purchaser. The critical factor in that resolution, namely that the Federal Court alone had the power to resolve the entire dispute, is no longer the case. The Supreme Court is now invested with jurisdiction of the TPA, and the basis for the decision in Fencott v Muller (supra) and other cases no longer exists.
In those circumstances it seems to me that forum shopping can be avoided if the respective Courts accede to a protocol by which belated proceedings in one Court are transferred to the Court in which the proceedings were initiated. I think it right that where there is no compelling reason to prefer one Court over another it should be a case of "first in and best dressed". However, this case is not one, in my opinion, where the application in the Federal Court proceedings was a belated response to the proceedings initiated by the vendor in the Supreme Court.
To my regret, therefore, it is not possible to consign these proceedings from the Federal Court to the Supreme Court on the basis of the protocol earlier referred to, and it is necessary to consider the difficult and discretionary questions concerning the appropriateness of the representative proceedings.
Section 33C of the Act requires three conditions to be satisfied before a representative proceeding can be commenced. First, seven or more persons must have claimed against the same person; secondly, those claims must arise out of the same, similar, or related circumstances and thirdly, those claims must give rise to a substantial common issue or law or fact: s 33C of the FCA Act. That section provides:
COMMENCEMENT OF PROCEEDING
33C(1) Subject to this Part, where:
(a) 7 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 issue of law or fact;
a proceeding may be commenced by one or more of those persons as representing some or all of them.
33C(2) A representative proceeding may be commenced:
(a) whether or not the relief sought:
(i) is, or includes, equitable relief; or
(ii) consists of, or includes, damages; or
(iii) includes claims for damages that would require individual assessment; or
(iv) is the same for each person represented; and
(b) whether or not the proceeding:
(i) is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or
(ii) involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.
Section 33N provides:
ORDER THAT PROCEEDING NOT CONTINUE AS REPRESENTATIVE PROCEEDING WHERE COSTS EXCESSIVE ETC
33N(1) The Court may, on application by the respondent or of its own motion, order that a proceeding no longer continue under this Part where it is satisfied that it is in the interests of justice to do so because:
(a) the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or
(b) all the relief sought can be obtained by means of a proceeding other than a representative proceeding under this Part; or
(c) the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or
(d) it is otherwise inappropriate that the claims be pursued by means of a representative proceeding.
33N(2) If the Court dismisses an application under this section, the Court may order that no further application under this section be made by the respondent except with the leave of the Court.
33N(3) Leave for the purposes of subsection (2) may be granted subject to such conditions as to costs as the Court considers just.
Section 33Z provides:
JUDGMENT - POWERS OF THE COURT
33Z(1) The Court may, in determining a matter in a representative proceeding, do any one or more of the following:
(a) determine an issue of law;
(b) determine an issue of fact;
(c) make a declaration of liability;
(d) grant any equitable relief;
(e) make an award of damages for group members, sub-group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies;
(f) award damages in an aggregate amount without specifying amounts awarded in respect of individual group members;
(g) make such other order as the Court thinks just.
33Z(2) In making an order for an award of damages, the court must make provision for the payment or distribution of the money to the group members entitled.
33Z(3) Subject to section 33V, the Court is not to make an award of damages under paragraph (1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment.
33Z(4) Where the Court has made an order for the award of damages, the Court may give such directions (if any) as it thinks just in relation to:
(a) the manner in which a group member is to establish his or her entitlement to share in the damages; and
(b) the manner in which any dispute regarding the entitlement of a group member to share in the damages is to be determined.
Having regard to the particular circumstances of these proposed representative proceedings, it is useful to note the provisions of s 33P of the FCA Act. That section provides:
Where the Court makes an order under section 33L, 33M or 33N that a proceeding no longer continue under this Part:
(a) the proceeding may be continued as a proceeding by the representative party on his or her own behalf against the respondent; and
(b) on the application of a person who was a group member for the purposes of the proceeding, the Court may order that the person be joined as an applicant in the proceeding.
Counsel on behalf of the applicants assert that most of the representations made on behalf of the respondents were made to most of the presently identified 18 members of the group. It is alleged that to 12 of the 18 purchasers of the proposed lots, representations were made concerning the availability of finance to the extent of 80 per cent of the price list. To all of the purchasers, the applicants say that the respondent represented that there was exceptional retail potential for the proposed lot.
This category of representation is important.
Drummond J said in Connell v Nevada Financial Group Pty Ltd (1996) 139 ALR 723 that where the alleged oral or written representations were made to the group members in differing words and on differing occasions it is necessary to plead the terms of the alleged misrepresentations made to various group members precisely so as to show that the substance and effect of the representations made to each group member is the same.
In the particulars of the statement of claim appears the assertion that the representation made in paragraph 5B of the statement of claim (which representation concerns the resale potential of proposed lots), was made orally by Mr Chris Couper, a real estate agent with Skye to each of the 18 named persons, at the place and month identified in schedule B to the statement of claims. The particulars recite:
The substance and effect of the terms of the discussion was that the units were a good investment as shown in the investment pack (which is a document marked D with the particulars of the statement of claim), that Couper would onsell them, that Raptis was about to increase the price and that the price would keep going up, that because almost all lots were already sold, onselling would occur and purchasers would make money on on-sales.
The particulars further specify as follows:
Representations made to particular members of the class were:
1. Roy Julian Flight: "The lot will be worth another $100,000.00 by the time you settle."
2. Janice and James Wong: On four occasions representations were made orally to the effect that lots could be re-sold before settlement at a large profit, the figure stated being $70,000.00.
3. Clarence Joe and Judy Joe for themselves and their children Carolyn Joe and Jeanette Joe: Representations to the effect that the increase in value meant there would be a profit from on-sales, there was plenty of time because the units would be marketed in Australia in March/April 1997, and the increase in value would be $100,000.00 per unit.
4. Julie Chan: Representations to the effect that the unit would be re-sold before settlement at a substantial profit.
5. Brendan Robert Moore and Jillian Meryl Moore: Representation that the profit to be obtained on a re-sale would be between $80,000.00 and $100,000.00.
6. Glenys Raywyn Daly and Graeme McDonald: "Do what I say and I will make you a lot of money". "I'll make you 100.000.00 on this".
7. Triana Guelfy and Cushia Revfeim: Units would be on-sold for $100,000.00.
8. Cecil Wong and Nancy Wong: Lots would be re-sold before settlement at a profit of $70,000.00.
9. Wayne Kui Wing Cheung: Units would be sold before May or June 1997 at $70,000.00-$100,000.00 above the purchase price and that Cheung would make a "quick dollar".
10. Claude and Susan Radics: Large capital gains of $60,000.00-$80,000.00 could be obtained on on-sale before settlement.
11. Robert Geoffrey Senior and Christine Joy Field (now Senior): Representation to the effect that the lot could be sold at a profit of $40,000.00-$50,000.00.
12. Marjarite and Raymond Weatherburn: The lot could be re-sold at a profit.
13. James Howard Potter: Units would be worth $30,000.00 more by March 1997 and by July about $100,000.00 more.
14. Vincent Fred Ellis Wong: Capital gain is assured before settlement of at least $50,000.00.
It is asserted by the representatives that Skye also prepared and gave a financial projection document to all 18 of the proposed members of the group containing projections which were alleged to have been made upon a reasonable basis. Further, it is alleged that 18 written statements were delivered to each of the 18 proposed members of the group pursuant to s 49 of the BUGT Act.
Section 49 of the BUGT Act relevantly provides:
49(1) Before a person contracts to purchase a lot or a proposed lot from an original proprietor, the original proprietor shall give to the person (or to the person's agent) a statement in the prescribed form signed by the original proprietor, in compliance in every respect with this section.
(2) A statement in writing under this section shall -
(a) clearly identify the lot or proposed lot to which the statement relates; and
(b) state the names and addresses respectively of the original proprietor and the purchaser; and
(c) set out or be accompanied by particulars of -
(i) the lot entitlement of every lot and the aggregate lot entitlement; or
(ii) the proposed lot entitlement of every proposed lot and the proposed aggregate lot entitlement; and
(d) set out or be accompanied by details of any prescribed arrangement entered into in respect of the plan or proposed plan including the terms and conditions of that prescribed arrangement and the cost or estimated costs thereof to the proprietor of each lot; and
(e) set out or be accompanied by the by-laws in force in respect of the plan or the proposed by-laws in respect of the proposed plan; and
(f) state the date on which the statement is signed; and
(g) be signed by the original proprietor or on the original proprietor's behalf by an agent authorised in writing by the original proprietor in that regard.
...
(4C) If the purchaser has been materially prejudiced (proof of which shall lie on the purchaser) by any matter referred to in a notice given pursuant to subsection (4) and the purchaser has not agreed to be bound by that matter, the purchaser may avoid the contract, agreement or other document by notice in writing given to the original proprietor or the original proprietor's agent within 30 days of the date of receipt by the purchaser of the notice given by the original proprietor or the original proprietor's agent.
(5) If the original proprietor fails to give to a purchaser -
(a) a statement in compliance in every respect with subsections (1) to (3); or
(b) a notice prescribed by subsection (4);
and the purchaser is materially prejudiced by the failure (proof of which shall lie on the purchaser) the purchaser may, by notice in writing given to the original proprietor, avoid the contract, agreement or other document within 30 days after the purchaser first becomes aware of the failure.
...
(6) Upon the avoidance of a contract referred to in this section the original proprietor shall be liable at law for the repayment to the purchaser of all moneys paid by the purchaser under the contract and such moneys shall be recoverable, by action as for a debt, by the purchaser accordingly.
(7) Save as prescribed by subsections (4) and (5B) this section applies so as not to render illegal or void any contract or to empower any party to avoid the contract.
...
(11) In this section -
"original proprietor" includes, in respect of a proposed lot or proposed plan, the person who upon registration of the proposed plan becomes the original proprietor.
The circumstances relevant to the Section 49 statements relate to all 18 of the presently identified members of the group. It is likely that the Section 49 statement was presented in the same form to all members of the group identified in the application.
It was submitted by Mr Hampson QC, senior counsel for Silkfield, that the different members entered into contracts at different times between October 1996 and March 1997, that the alleged misrepresentations occurred in New Zealand, Australia and Broadbeach, and that the circumstances of each member will arguably be different when it comes to the issue of damages pursuant to s 82 of the TPA and allegations that the members are each materially prejudiced. It was further submitted that the proceedings do not arise out of "related circumstances" within the meaning of s 33C of the FCA Act nor is there "a substantial common issue of law or fact" because there were different contracts at different dates stretching over a period of over five months. The contracts related to different lots or units in the building. The representations, it was stressed, were either oral or in writing and made in separate locations (Auckland or Broadbeach), some of those representations applying to only some of the group members.
As I indicated earlier, the presently identified members of the group purchased 39 of the lots in the one building. All of the representations were made by representatives of Skye. All representations were made in Alpers Lodge, Auckland as well on occasions at Broadbeach, Queensland, except for the seventh representation in the statement of claim which was made at Broadbeach and the ninth representation which was made by the common form of contract. Nearly all of the representations were made in November and December 1996. All of the presently identified members of the group were given the financial projection document, which is annexure D to the further and better particulars of the statement of claim.
French J in Zhang v The Minister for Immigration [1993] FCA 489; (1993) 45 FCR 384 said at 404 that s 33C(1)(b):
...contemplates a relationship between the circumstances of each claimant and specifies three sufficient relationships of widening ambit.
Each claim is based on a set of facts which may include acts, omissions, contracts, transactions and other events. As appears from s 33C(2), the circumstances giving rise to claims by potential group members do not fall outside the scope of the legislation simply because they involve separate contracts or transactions between individual group members and the respondent or involve separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.
The outer limits of eligibility for participation in representative proceedings are defined by reference to claims in respect of or arising out of related circumstances. The word "related" suggests a connection wider than identity or similarity. In each case there is a threshold judgment on whether the similarities or relationships between circumstances giving rise to each claim are sufficient to merit their grouping as a representative proceeding. At the margins, these will be practical judgments informed by the policy and purpose of the legislation. At some point along the spectrum of possible classes of claim, the relationship between the circumstances of each claim will be incapable of definition at a sufficient level of particularity, or too tenuous or remote to attract the application of the legislation.
Einfeld J observed in Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304 at 311:
I am not convinced that mere volume of evidence disqualifies a proceeding from being undertaken as a class action. Nor in my experience has complexity ever been a reason for failure to determine an issue. I am also not persuaded that substantial differences in individual circumstances disqualify a case from being a class action. Part IVA anticipates that individuals in the group will have differing circumstances.
...
As far as group actions provided for by Pt IVA are concerned, what is relevant is similarity not difference.
...
His Honour continued:
If in substance there are only superficial common features, no basic or generic claims, and minimal uniting characteristics, then the trial becomes fundamentally an investigation of individual circumstances. Obviously if the common thread is only tangentially relevant or no more than coincidence, and will not have a bearing on the determination of the issues, it would not be apt for the proceeding to be pursued as a group action.
One example of this situation occurred in Soverina Pty Ltd v Natwest Australia Bank Ltd [1993] FCA 65; (1993) 40 FCR 452 at 456 where Hill J considered that it was inappropriate that the proceedings continue as a representative action for the reason that:
`What Soverina has purported to do here is to join together, under the guise of a representative proceeding, proceedings by it and various diverse others which arise out of factual circumstances related only in an historical sense many of which involve discrete factual and legal issues.'
In the present case it seems to me that there is a commonality concerning most of the claims by the proposed members of the group. They each contracted to purchase a lot or lots on the group strata plan. The nature of their interest is the same, unlike in Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 where the applicant, a furniture trader, had a personal claim for loss of business by a competitor, that claim being different from the other members of the class whose claim was that they, because of false statements in advertisements, made purchases at a price in excess of the true value of the furniture.
Part IVA of the FCA Act gives effect to the major objective recommended by the Australian Law Reform Commission Report 46, namely, to:
[enable] groups of people to obtain redress from multiple wrongs more cheaply and efficiently than individual actions promoting consistency in decision-making and encouraging the efficient use of resources by practitioners in the courts.
During the second reading speech of the Federal Court of Australia Amendment Bill 1991, the then Attorney-General, Mr Michael Duffy said in Parliament on 14 November 1991 at 3174 of Hansard:
The Bill gives the Federal Court an efficient and effective procedure to deal with multiple claims. Such a procedure is needed for two purposes. The first is to provide a real remedy where, although many people are affected and the total amount at issue is significant, each person's loss is small and not economically viable to recover in individual actions. It will thus give access to the courts to those in the community who have been effectively denied justice because of the high cost of taking action.
The second purpose of the Bill is to deal efficiently with the situation where the damages sought by each claimant are large enough to justify individual actions and a large number of persons wish to sue the respondent. The new procedure will mean that groups of persons, whether they be shareholders or investors, or people pursuing consumer claims, will be able to obtain redress and to do so more cheaply and efficiently than would be the case within individual actions.
The present case is not within the first purpose referred to by the then Attorney-General. The question is whether the present circumstances fall within the second purpose of the Bill and whether in truth the representative proceeding will permit the matters to be dealt with more cheaply and efficiently than would be the case with individual actions.
It must be recognised that in the present case there are non-common issues involved in the various individual complaints and in any event, in each individual case, there is the question of reliance which is a matter confined to the individual group member. There is also the further question which is contentious, namely, whether the "material prejudice" referred to in s 49 of the BUGT Act requires an examination of the subjective circumstances of the purchaser or whether it can be objectively determined. Some types of representations were alleged to have been made to some only of the group members and in each case there would be cross-claims by the vendor either for specific performance or for damages. It is unlikely that these claims would be the same.
However, in my view, the claims by the proposed group members in the present proceedings satisfy the requirements of 33C(1)(b), to the extent that the claim is based on the making of representations concerning resale at a profit before settlement, performance, projections, whether the requirements of s 49 of the BUGT Act have been complied with, and the associated question of whether the representations contained by the giving of the Section 49 statements were accurate.
In my opinion, s 33C(1)(a) is satisfied in the present case.
As to s 33C(1)(b), Drummond J in Connell's case said at 728:
It is not, I think, an objection to proceedings being brought as representative proceedings and founded upon an oral (or a written) representation made to the various class members that the representation may have been made on different occasions and in a different form of words to each class member, so long as the court can be satisfied that the substance and effect of what was orally represented is the same. But, in such cases, the court must be satisfied that each class member truly does set up a representation to the same substance and effect. Since the court can act of its own motion under s 33N(1) to order that a proceeding no longer continue as a representative proceeding and since it has inherent or implied power to ensure that its process is not abused by proceedings being brought as representative proceedings when in truth there is no issue of law or fact common to the claims of the group members, as required by s 33C(1)(c), it is incumbent on the applicants who bring a representative proceeding so based to plead with precision the terms in which the representation was made to each to show that, although made in differing words, the substance and effect of the representation made to each class member is truly the same.
There has been some judicial disagreement concerning the width of s 33C(1)(c). In Connell (supra), Drummond J said at 731 as follows:
In my opinion, given that the object of Pt IVA of the Federal Court of Australia Act 1934 is to enable groups of people to obtain redress more cheaply and efficiently than in individual actions and to encourage the efficient use of legal and court resources, the phrase "a substantial common issue of law or fact" is not satisfied by an issue (or a number of issues) common to all the group members' claims which cannot be dismissed as trivial, whether an issue is a substantial common issue cannot be answered by focusing solely on the common issue, to the exclusion of the non-common issues that will also have to be resolved to determine the entire action. Section 33C(2) shows that a common issue can be a substantial one sufficient to satisfy s 33C(1)(c) even though the various group members' claims involve other issues of liability and damages unique to each of those claims. But the object of Pt IVA would not be served if it was enough for there to be an issue common to each of the group members' claims that could not be dismissed as trivial or insubstantial, even though that common issue was, when compared with the other non-common issues raised in the various claims as to liability and damages, merely one of a number of issues which had to be resolved before each claim could be determined. If, in addition to the common issue (or issues), the determination of each group member's claim involves other non-common issues, the litigation of which will, in a practical sense, have a real impact on the nature and extent of the interlocutory steps likely to be involved in bringing the case to a state of readiness for trial, then that common issue will not be "a substantial common issue" within s 33C(1)(c).
Wilcox J, writing extrajudicially in (1997) 8 APLR 77 (which article also appears at (1997) 15 ABR 91 et seq said at 79 (and 93) of this statement by Drummond J:
I have difficulty with aspects of this passage. The issue posed by s 33C(1)(c) is whether the various claims give rise to a `substantial common issue of law or fact'. `Substantial' is imprecise, it is an adjective of degree requiring an element of evaluation. But it is difficult to see why it is necessary, or legitimate, to compare the substantiality of a common issue with the substantiality of any non-common issues. The words of the paragraph do not invite such a comparison; top take this course is to encourage respondents to raise artificial non-common issues.
In any particular case, there may be a substantial common issue and one or more substantial non-common issues. If the latter are so significant as to be likely to swamp the common issue at the trial, notwithstanding any case management directions the court may make, this may be a reason for concluding that the proceeding should not continue as a representative proceeding as it `will not provide an efficient and effective means of dealing with the claims of group members' or `it is otherwise inappropriate that the claims be pursued by means of a representative proceeding'. If the court reaches that conclusion, it will terminate the proceeding's status as a representative proceeding as an act of discretion (Section 33N(1)(d)). But it will do this only after evaluating all the circumstances, including the case management tools available to the court, not by deciding that the action was incorrectly commenced.
There is no requirement in Part IVA of the FCA Act similar to r 23(b)(3) of the United States Federal Rules of Civil Procedure, namely, that the common issues of fact or law predominate. Part IVA is meant to be a flexible procedure to advance the interests of justice. There will always be a large degree of evaluation concerning commonality and non-commonality of issues and ultimately, if because of the extent of non-common issues, representative proceedings in the assessment of the court are not the preferable means of dealing efficiently and effectively with the claims, the court will no doubt terminate the representative nature of the proceedings in the exercise of the discretion conferred by s 33N(1)(d) of the FCA Act.
It is, in every case, a question of assessing the particular circumstances so as to determine the preferable means of handling the litigation.
As far as the motion filed by the vendor is concerned, I am not prepared at this stage to declare that it is not open to the applicants to commence these proceedings as representative proceedings. It follows that I am not minded to transfer these proceedings to the Supreme Court nor to make a transfer order pursuant to s 86A of the TPA. It seems to me that the Court can, by giving appropriate directions, consider the correctness of the allegations concerning what I have termed the "common issues" involved in these proceedings and further that the resolution of those common issues will go a long way to determining the claims by Silkfield on the one hand and by the individual group members on the other.
I accept that there are separate questions of reliance and of damages either on the part of the group members or on the part of the vendor but, looking at the matter in a practical sense, I do not anticipate that those matters will cause too much difficulty on the resolution of the common issues. The cross-claims by the vendor, (should the representative proceedings fail as against the vendor), are matters which I would anticipate would be almost able to be agreed. Similarly, if the representative proceedings are successful so far as the establishment of misleading and deceptive conduct on behalf of the vendor, then I would think that the question of reliance and the question of the relief to which individual group members might be entitled would not be matters that would cause great difficulty.
In the present case, I am not dealing with a situation where the common matters are not, in a sense, central to the representative proceedings. The parties are agreed that the costs, (if this matter were to proceed as a representative proceeding), would be of the order of $120,000 and would involve a nine day trial. The position is that each of the separate claims of each member of the group is not a large claim in itself. There are advantages to members of the group in being able to contribute to the costs of one action as opposed to each of them having to conduct a separate action against the respondent. On the other hand, there are obvious tactical advantages to Silkfield if it could force the members of the group to each conduct separate proceedings with the additional cost that that course of action would involve.
It seems to me that it would be considerably cheaper and more efficient if the matters continue as representative proceedings, at least so far as the resolution of the common issues. The further conduct of the matters can be then looked at in the light of s 33P or, indeed, s 33N of the FCA Act.
The final matter which must be addressed in the vendor's notice of motion concerns the question of security for costs. Each of the three applicants or representatives are residents of New Zealand. The applicants and the respondents are agreed that the action will cost approximately $120,000.00, the trial being estimated at nine days.
The evidence indicates that Mr Flight has an unencumbered property within the jurisdiction of the Court. In those circumstances the observations of Rath J in Connop v Varena Pty Ltd [1984] 1 NSWLR 71 are apposite.
In that case, the Supreme Court Rules (NSW) (1970) Part 53, r 2(1)(a), then provided that the Court on application by a defendant, may order a plaintiff to give security for the costs of the defendant of any substantive proceedings where it appears the plaintiff is ordinarily resident outside the State.
His Honour held that Part 53, r 2(1)(a) conferred on the Court a discretion whether or not to order security and as to the amount of the security if the Court thinks fit to make an order, and that where there is a plaintiff outside the State, the Court must have regard to matters relevant to the exercise of that discretion such as the connection between the State and the plaintiff, the extent of the plaintiff's assets both within and outside the State, and in particular in the place where the plaintiff is ordinarily resident and the availability of the plaintiff's assets outside the State for satisfaction of any judgment for costs obtained against him in the State.
His Honour said at 74:
In New Zealand, the Reciprocal Enforcement of Judgments Act (1934, No 11) provides for the enforcement by registration in New Zealand of judgments of the Supreme Court of New South Wales (especially s 4, and the New Zealand Order in Council serial number 1940/88 of 14 May 1940). The procedure for registration is set out in rules under that Act (Order in Council, 18 November 1935; 1935 NZ Gazette, 3600). Registration is effected by application on motion, supported by evidence as to the rate of exchange and the right to registration. An order for costs against the plaintiffs in this case would present no difficulties of any significance upon registration proceedings in New Zealand, and though there is provision for setting aside registered judgments none of the cases (as they are called in the Act) for so doing would be applicable. There is provision in the rules for security for costs, and it is possible that delay in enforcement could arise as the result of appeals in the New South Wales appellate system.
Thus there may be some delay, inconvenience and expense arising from registration and execution of a judgment in New Zealand; but apart from this I see no difference in regard to the costs of the first and second defendants between the circumstances of this case and those of a similar case where a plaintiff is not ordinarily resident outside the State. With only minor reservations, a judgment for costs will be as effective against the plaintiffs here as it would be in the case of a plaintiff who did not ordinarily reside outside the State: see Re Percy & Kelly Nickel, Cobalt and Chrome Iron Mining Co (1876) 2 Ch D 531 per Jessel MR at 531.
His Honour's conclusion, which appears at page 75, was as follows:
As the plaintiffs' only substantial assets are in New Zealand, and as the enforcement of a judgment for costs may give rise to additional costs, I propose to order the plaintiff to give security for costs, but that such security should be limited to the costs of registration and execution in New Zealand of the judgment for costs in this Court in favour of the first and second defendants against the plaintiffs.
Connop was distinguished by Sheppard J in Kent Heating Ltd v Cook-On Gas Products Pty Ltd (1984) 59 ALR 277 but on a basis which no longer applies. Sheppard J said at 278:
I should note in passing that judgments of the Supreme Courts of the States of Australia are enforceable by a simple procedure which is provided for in the Reciprocal Enforcement of Judgments Act 1934 (NZ) which, I gather, contains provisions not much more complex than those which are contained in the Service and Execution of Process Act 1901 which provide for the enforcement in one State of Australia of a judgment obtained in another State. The Reciprocal Enforcement of Judgments Act 1934 is not available in the present case because it has not been extended by order-in-council New Zealand (sic) to apply to judgments of this court, nor I think of the High Court.
It would seem to me, if I may say so in passing, that those who have the responsibility of providing for these things both in New Zealand and in Australia, may well consider it appropriate to ensure that enforcement of judgments in New Zealand of this court or of the High Court should be no more complex than is the case in relation to the enforcement of judgments of the Supreme Court of the States.
By order-in-council dated 9 February 1987 the Governor-General of New Zealand in Council ordered that Part 1 of the Reciprocal Enforcement of Judgments Act (NZ) extend to the Commonwealth of Australia, and that the High Court of Australia and the Federal Court of Australia be deemed to be superior Courts of the Commonwealth of Australia for the purposes of Part 1 of that Act.
Therefore, the position now is that the conditions which led Rath J to make the orders he did in Connop (supra) apply in respect of litigation in the Federal Court.
Mr Keane QC, senior counsel for the representatives, offered an undertaking on behalf of Mr Flight "not to dispose of, encumber or otherwise deal with his property referred to in the affidavit material" until a determination of these proceedings or earlier order and also offered an undertaking on behalf of each of the applicants that they would consent to registration in New Zealand of any order for costs obtained against them or any of them in the proceedings.
In my opinion, the Court should accept the undertakings offered by Mr Flight and by each of the applicants. I am of the opinion that the position of Silkfield regarding costs is thus adequately protected and no order for security for costs is warranted.
Having heard counsel for both parties on the question of costs of the motion filed 5 December 1997, it seems to me that a fair order in all the circumstances of the case is that the costs of the motion be the representatives' costs in the principal proceedings and I make that order.
As to the motion filed on behalf of the applicants, there are a number of matters which trouble me. The applicants' notice of motion sought first an order pursuant to s 33J(1) of the FCA Act fixing a date before which a group member may opt out of the representative proceedings. It also sought an order pursuant to s 36X(1A) of the FCA Act requiring the applicants to give notice to group members of the commencement of the proceedings and the right of the group members to opt out of the proceedings before a specified date being the date fixed under s 33J(1) of the FCA Act. The motion further sought an order pursuant to s 33Y(2) of the FCA Act approving the form and content of the notice referred to in the second prayer for relief and an order pursuant to s 33Y(3) of the FCA Act specifying who is to give the notice and the way in which the notice is to be given, as concerns the form, content, and the giving of the said notice and costs thereof.
I am not minded to make any of those orders without the assistance of counsel as to a draft of the order that I might be persuaded to make. The major difficulty I have in these particular circumstances is that I do not want to cause any anxiety or gratuitous denigration of the vendor by requiring the publication of notices which can have no useful purpose other than to suggest that there might be fault on the vendor's part in relation to its marketing of the building. At the same time, the FCA Act must be complied with and any person who has a claim as a member of the group must not miss out on the opportunity of opting out.
I propose to adjourn the purchasers' motion for further submissions and for the provision of draft orders that the purchasers wish me to make. With that object in mind, it seems to me that the notice should be directed only to persons who entered into contracts to purchase lots in the building from Silkfield by or through the agency of Skye prior to the date of registration of the plan in respect of such building, and who were provided by Silkfield with a statement purportedly made pursuant to s 49 of the BUGT Act.
It may be that the solicitors for the parties can confer, in the hope that any potential members of the group other than the 18 persons who appear at annexure A to the statement of claim can be identified. Absent agreement as to any further potential members, I will have to consider what the court should do in relation to it. If there are no further members, or if there are further members, and they can be identified, then I will give directions as to the publication of the notice to them.
The further matter of difficulty is the question of opting out. This case is unusual in the sense that this is a case where one can identify, one would hope with precision, the persons who are members of the group of persons who might be affected by the conduct complained of.
This is not a mass torts case such as the case of asbestos exposure which the Supreme Court of the United States recently considered in Amchem Products Incorporated v Windsor (1997) US Lexis 4032. This is a case where it seems to me that it would be in the interests of both the vendor and the purchaser to have identified with precision the persons who are members of the group and to have it made plain that they are parties to the representative proceedings if only so that ultimately the Court will be able to give judgment either for or against those persons in the same way that the Court will hope to give judgment for or against the 18 named members who appear at annexure A to the statement of claim.
I further order that the costs of the motion filed by the applicants on 8 December 1997 be reserved.
I will list the representatives' motion for mention and further submissions at 11 am on 4 February 1998, in the hope that that matter can be the result of some fruitful discussion between the parties.
|
I certify that this and the preceding twenty (20) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Spender |
Associate:
Dated: 16 January 1998
|
Counsel for the Applicant: | P A Keane QC and A B Crowe |
| Solicitor for the Applicant: | Wendy Cull |
| Counsel for the Respondent: | C E K Hampson QC and C Carrigan |
| Solicitor for the Respondent: | Short Punch & Greatorix |
| Date of Hearing: | 16 December 1997 |
| Date of Judgment: | 16 January 1998 |
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