Francey v Sharpe Development Group Pty Limited [2005] FCA 1059 (2 August 2005)

PRACTICE AND PROCEDURE – representative proceedings – application for substitution of representative applicant – application for leave to file and serve further amended application – formulation of claim for damages – application that the proceeding no longer continue under Part IVA of the Federal Court of Australia Act 1976 (Cth) – whether appropriate to exercise the discretion under s 33N of the Federal Court of Australia Act 1976 (Cth).

Federal Court of Australia Act 1976 (Cth) s 33N, s 33T

Bright v Femcare Limited (2003) 195 ALR 574 referred to

KENNETH GEORGE FRANCEY v SHARPE DEVELOPMENT GROUP PTY LTD (ACN 082 861 658) AND WILLIAM BENJAMIN SHARPE

NSD 1123 of 2004

BRANSON J
2 AUGUST 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1123 of 2004

BETWEEN:	KENNETH GEORGE FRANCEY APPLICANT
AND:	SHARPE DEVELOPMENT GROUP PTY LTD (ACN 082 861 658) FIRST RESPONDENT WILLIAM BENJAMIN SHARPE SECOND RESPONDENT
JUDGE:	BRANSON J
DATE OF ORDER:	2 AUGUST 2005
WHERE MADE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1123 of 2004

BETWEEN:	KENNETH GEORGE FRANCEY APPLICANT
AND:	SHARPE DEVELOPMENT GROUP PTY LTD (ACN 082 861 658) FIRST RESPONDENT WILLIAM BENJAMIN SHARPE SECOND RESPONDENT

JUDGE:	BRANSON J
DATE:	2 AUGUST 2005
PLACE:	SYDNEY

1 This proceeding was instituted under s 33C of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’) on 21 July 2004. Both the application and the statement of claim contained notations indicating that they were drafted and settled by Neil Francey of Counsel (‘Mr N Francey’).

2 The representative applicant is Kenneth George Francey (‘Mr K Francey’), the brother of Mr N Francey. Mr K Francey lives in Kent in the United Kingdom. The group members whom Mr K Francey represents are presently identified as the ‘Lot owners in SP 144389-16 Golden Orchid Drive, Airlie Beach, Qld, as at 21 July 2004 excluding the Respondents’. The claims of the group members are identified as claims that the respondents have engaged in unconscionable conduct in contravention of provisions of Part IVA of the Trade Practices Act 1974 (Cth) (‘the TPA’) and misleading or deceptive conduct in contravention of s 52 of the TPA. The statement of claim reveals that 16 Golden Orchid Drive, Airlie Beach has been developed by the respondents as a resort known as ‘Pinnacles Resort & Spa’ (‘Pinnacles’). The principal complaint of the representative applicant as pleaded relates to his having purchased a unit in Pinnacles in reliance on promotional material that represented that Pinnacles would include a day spa. It is alleged in the statement of claim that there is no operational day spa in Pinnacles.

3 Various interlocutory skirmishes followed the service of the application and statement of claim. The respondents sought orders requiring the representative applicant to provide security for the respondents’ costs of the litigation. They also challenged his asserted interest in a unit in Pinnacles and thus his standing to commence the representative proceeding. Additionally various objections were taken to the way in which the group members were described and to the way in which their case was pleaded. No date has as yet been fixed under s 33J of the Federal Court Act by which a group member may opt out of the proceeding.

5 Neither Mr N Francey, nor any other group member, has made a formal application under s 33T of the Federal Court Act for Mr N Francey to be substituted for Mr K Francey on the basis that it appears that Mr K Francey is not able adequately to represent the interests of the group. Nonetheless, I consider that I should proceed on the basis that an application that Mr N Francey become the representative applicant is made under s 33T. Mr N Francey is a registered proprietor of a unit in Pinnacles. It is accepted that he is, and has at all times been, a group member. Subject to their contention that this proceeding should not continue as a representative proceeding, the respondents do not oppose his becoming the representative applicant. I am satisfied that the difficulties that attend the nomination of Mr K Francey as the representative applicant, which difficulties need not be outlined here, make it appear that he may not be able adequately to represent the interests of the group. It will be ordered that Mr N Francey be substituted for Mr K Francey as the representative applicant.

6 Again, subject to their contention that this proceeding should not continue as a representative proceeding, the respondents do not oppose leave being granted to the representative applicant to file and serve a third amended application in the form of the document provided to the Court on 5 July 2005. I understand that it is accepted by all parties that the reference in paragraph 2 of that document to ‘July 2003’ should be ‘31 July 2003’. On this basis it will be ordered that the representative applicant have leave to file and serve a third amended application in the form of the document provided to the Court on 5 July 2005 by no later than 5 August 2005.

7 The representative applicant seeks leave to file and serve a third amended statement of claim in the form of a document provided to the Court on 5 July 2005. In addition to relying on their contention that this proceeding should not continue as a representative proceeding, the respondents oppose the representative applicant being granted leave to file and serve a third amended statement of claim in the form proposed on the ground that the claim for damages is inappropriately formulated. I do not consider that leave to file and serve a third amended statement of claim should be withheld by reason only of the way in which the claim for damages is formulated. If at trial the claim for damages as then formulated cannot be substantiated, the respondents will presumably be entitled to judgment in their favour. If leave to amend the statement of claim yet further is sought and granted in the future, the respondents will have a prima facie case for their costs thrown away by reason of the further amendment. If problems do attend the formulation of the claim for damages they will, in my view, be more readily rectified after the time by which a group member may opt out of the proceeding has expired. It will be ordered that the representative applicant have leave to file and serve a third amended statement of claim in the form of the document provided to the Court on 5 July 2005 by no later than 5 August 2005.

9 It is too early in the life of this proceeding for me to be able to assess whether the costs that would be incurred if this 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 (s 33N(1)(a)). I am, however, inclined to doubt that they would. However, I see no reason to doubt that all the relief sought can be obtained by means of a proceeding other than a representative proceeding (s 33N(1)(b)). I am not presently satisfied that this representative proceeding will not provide an efficient and effective means of dealing with the claims of group members (s 33N(1)(c)). I am not presently satisfied that it is for any other reason inappropriate that the claims be pursued by means of a representative proceeding (s 33N(1)(d)). Without in any way detracting from the observation made by Finkelstein J in Bright v Femcare Limited (2003) 195 ALR 574 at 607-8; [2002] FCAFC 243 at [160] concerning the inappropriateness of numerous interlocutory applications being made in representative proceedings, I consider that the parties and the Court will be in a better position to evaluate the desirability of this proceeding continue under Part IVA after the expiry of the time within which group members may opt out of the proceeding.

10 I proceed on the basis that, subject to my being satisfied that it would be in the interests of justice for me to do so, I am empowered by s 33N of the Federal Court Act to order that this proceeding no longer continue under Part IVA of the Federal Court Act (see s 33N(1)(b)). However, I do not consider that it would be in the interests of justice for me now to exercise the discretion vested in the Court by s 33N to order that the proceeding no longer continue under Part IVA. Whether it will ever be appropriate to do so remains to be seen.

11 The respondents are, I think, entitled to an order that the applicant pay their costs of the applications that Mr N Francey be substituted as the representative applicant and that the representative applicant have leave to file a third amended application and a third amended statement of claim; also their costs of, and throw away in consequence of, the success of these applications. I doubt that the applicant incurred any substantial costs by reason only of the respondent’s failed application. However, I will delay making any costs order consequent upon these reasons for judgment until the parties have an opportunity to consider them.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Counsel for the Applicant:	N Francey

Solicitor for the Applicant:	Maurice May Lawyers

Counsel for the First and Second Respondents:	D Savage

Solicitor for the First and Second Respondents:	Williams Graham Carman

Date of Hearing:	4 May, 5 July 2005

Date of Judgment:	2 August 2005

1.	Neil Francis Francey be substituted for Kenneth George Francey as the representative applicant.
2.	The applicant have leave to file and serve a third amended application in the form of the document provided to the Court on 5 July 2005 by no later than 5 August 2005.
3.	The applicant have leave to file and serve a third amended statement of claim in the form of the document provided to the Court on 5 July 2005 by no later than 5 August 2005.