Carnie v Esanda Finance Corporation Ltd [1995] HCA 9; (1995) 182 CLR 398; (1995) 127 ALR 76; (1995) 69 aljr 206 (23 February 1995)

HIGH COURT OF AUSTRALIA

CARNIE AND ANOTHER v ESANDA FINANCE CORPORATION LIMITED
F.C. 95/004
Number of pages - 24
Practice [1995] HCA 9; (1995) 182 CLR 398
(1995) 127 ALR 76
(1995) 69 aljr 206

HIGH COURT OF AUSTRALIA
MASON CJ(1), BRENNAN(2), DEANE(1), DAWSON(1), TOOHEY(3), GAUDRON(3) AND McHUGH(4) JJ

Practice - Representative action - Persons having same interest in proceedings - Persons with separate causes of action - Whether same interest - Supreme Court Rules 1970 (N.S.W), Pt 8, r. 13(1).

HEARING

1994, March 3; 1995, February 23
23:2:1995

ORDER

Appeal allowed.
Set aside the orders made by the New South Wales Court of Appeal on 18 Remit the matter to the Court of Appeal for consideration of the question whether it should "otherwise order", within the meaning of the Supreme Court Rules 1970 (N.S.W.), Pt 8 r.13(1), that the action not continue as a representative action.
The respondent to pay the appellants' costs of the appeal to this Court and of the appeal to the New South Wales Court of Appeal.

DECISION

MASON CJ, DEANE AND DAWSON JJ. Subject to the comments which
follow, we agree with the reasons given by Toohey and Gaudron JJ. for
allowing the appeal. We would, however, remit the matter to the Court
of Appeal for the purpose of considering whether an order should be
made that the action not continue as a representative action.

2. We do not agree with the statement of Kirby P in the Court of
Appeal that the majority in that Court (Gleeson CJ and Meagher JA)
failed to answer the correct question because their Honours assumed
that the appellants were bringing a class action. Properly
understood, the majority concluded that the particular procedure
adopted by the appellants in this case - which their Honours happened
to characterize as a "class action" - was not within the Supreme Court
Rules 1970 (N.S.W.), Pt 8 r.13(1). This conclusion is contained in the
following passage of Gleeson CJ (1 (1992) 29 NSWLR 382 at 389.
Meagher JA agreed with the Chief Justice in a short concurring
judgment) :
"To say that each borrower has the same interest in the proceedings as
(the appellants), for the purpose of the rule relating to
representative actions, goes well beyond received notions of the scope
and purpose of the rule."

3. Whether the present case was or was not a class action is not
the critical question. More than that, it is not a question which is
susceptible of a precise or an instructive answer. The term "class
action" is used in various senses. Sometimes it is employed as a
generic term to comprehend any procedure which allows the claims of
many individuals against the same defendant to be brought or conducted
by a single representativea (2 Australian Law Reform Commission,
Report No.46, Grouped Proceedings in the Federal Court, (1988) at 1) .
At other times, when the "same interest" stipulation was thought to
preclude the application of the representative action procedure to
actions for damages on the ground that each individual's entitlement to
damages would have to be independently assesseda (3 ibid. at 3) , the
term "class action" was employed to refer to an extension of the
representative action to cover such actions.

4. The remaining sense in which the term "class action" is used is
by way of reference to the class action procedures prescribed and
applied in the United States, such as the procedures prescribed by the
Federal Rules of Civil Procedure, r.23 (4 See ibid., Appendix C,
"Other models for class actions", at 191) . This is the sense in which
the majority in the Court of Appeal used the term. It would be
unprofitable and difficult to make a precise comparison between a
representative action under r.13 and a class action under r.23 but we
see no reason to doubt that the two rules could cover much common
ground. The elaborate set of provisions contained in r.23 would create
some differences. But this does not seem to be of much moment for
present purposes. What the majority in the Court of Appeal thought to
be important was that, in the absence of legislation or a rule of court
prescribing an elaborate set of rules regulating representative
actions, a representative action could not be constituted in the manner
contended for by the appellants.

5. But we do not think that this approach of the majority of the
Court of Appeal can prevail in the face of the language of r.13(1).
All that this sub-rule requires is numerous parties who have the same
interest. The sub-rule is expressed in broad terms and it is to be
interpreted in the light of the obvious purpose of the rule, namely,
to facilitate the administration of justice by enabling parties having
the same interest to secure a determination in one action rather than
in separate actions. 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 classa (5 Prudential Assurance v. Newman
Industries (1981) Ch 229 at 255) . 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 recognized that persons having separate
causes of action in contract or tort may have "the same interest" in
proceedings to enforce those causes of action.

6. Much as one might prefer to have a detailed legislative
prescription by statute or rule of court regulating the incidents of
representative action, r.13 makes provision for an action to proceed
as a representative action in a context in which there is no such
legislative prescription. The absence of such a prescription does not
enable a court to refuse to give effect to the provisions of the rule.
Nor, more importantly, does the absence of such prescription provide
a sufficient reason for narrowing the scope of the operation of the
rule, as the Court of Appeal did, without giving effect to the purpose
of the rule in facilitating the administration of justice.

7. Once the existence of numerous parties and the requisite
commonality of interest are ascertained, the rule is brought into
operation subject only to the exercise of the court's power to order
otherwise. And that leaves for consideration the question whether the
case is one in which the court should, in the exercise of that power,
make an order that the action should not continue as a representative
action. Relevant to that question are some of the comments of Gleeson
CJ in the course of explaining his concern about the absence of a
detailed legislative prescription. In that context, Gleeson CJ
mentioned the need to deal with such important matters asa (6 (1992)
29 NSWLR at 388) :
(1) whether or not consent is required from group members;

(2) the right of such members to opt out of the proceedings;

(3) the position of persons under a disability;

(4) alterations to the description of the group;

(5) settlement and discontinuance of the proceedings; and

(6) the giving of various notices to group members.

8. The question of the importance of those matters, in the context
of the particular case, in determining whether an order should be made
that the action not continue as a representative action is by no means
free from difficulty. However, the Court is not in a position to deal
with them or with the consequences of the absence of a legislative
prescription with respect to them. Indeed, argument has not been
directed to that issue in this Court. The Court should not embark
upon an examination of the question whether such an order should be
made in the absence of such argument and without having the benefit of
the views of the Court of Appeal.

9. In the result, we would allow the appeal, set aside the orders
made by the Court of Appeal striking out the further amended statement
of claim in so far as it purports to plead a representative action and
remit the matter to the Court of Appeal for consideration of the
question whether it should "otherwise order" within the meaning of
r.13(1).

BRENNAN J. The appellants, Mr and Mrs Carnie (the plaintiffs), plead
in their further amended statement of claim against the respondent,
Esanda Finance Corporation Limited (the defendant), that the variation
agreement into which they entered is a regulated loan contract within
the terms of the Credit Act 1984 (N.S.W.), that it does not comply
with the requirements of Pt 3 of that Act and that the plaintiffs are
therefore not liable to pay to the defendant the credit charge under
the variation agreement. The allegation that the variation agreement
is a regulated loan contract depends on its alleged non-compliance
with at least one of the requirements of s.70, compliance with which
would have exempted the agreement from the disclosure provisions of the
Act. In particular, the argument supporting non-compliance draws
attention to sub-s.(1)(a) which reads:

" The credit provider and the debtor under a credit sale contract or a
loan contract may agree to vary the terms of the contract in relation
to, or to payment of, the amount owing under the contract if:

(a) the outstanding balance of the amount financed at the date of the
variation is not increased by the variation or is increased by the
variation by reason only of the addition of an amount referred to in
subsection (3)".

The disclosure provision of the Act that was said not to have been
complied with is s.36 and, in particular, s.36(1)(e). It was
submitted that, contrary to that provision, the variation agreement did
not contain "a statement of the annual percentage rate in accordance
with section 38". Subject to s.85 (which authorizes the Commercial
Tribunal to relieve a credit provider from the civil consequences of
non-disclosure), s.42(1)(b) provides that where "a loan contract ...
is not in accordance with section 36 ... the debtor is not liable to
pay to the credit provider the credit charge under the contract".

2. The facts relevant to these issues are not likely to be in
controversy. But those facts raise the issue of the meaning of the
phrase "the amount financed" in s.70(1)(a). The defendant, in
accordance with what was said to be its office practice at the time,
added the unpaid credit charges under the plaintiffs' original loan
contract to the principal sum that had been financed under that
contract in calculating "the outstanding balance of the amount
financed" for the purposes of the variation agreement. The addition
of unpaid credit charges under the original loan contract, and the
practice of which it was said to be an instance, are claimed by the
plaintiffs not to be in compliance with s.70(1)(a). That is because
"the amount financed" is said to consist only in the amount financed
under the original loan contract and to exclude unpaid credit charges
under the original loan contract. It was this issue which generated the pleading in sub-par.(b) of par.6 of the further amended statement of claim which reads:

"6 The Plaintiffs bring these proceedings on behalf of themselves and
all other persons ('the represented debtors') who have:-

(a) on or after 28 February 1985 entered into loan or credit sale

contracts with the Defendant which were regulated contracts within the
meaning of that term in the Credit Act 1984,

(b) each of which contracts has been varied by an agreement ('the

variation agreement') which did not discharge the original contract,
and

(i) wherein the total amount payable pursuant to the

variation agreement was calculated by applying the annual percentage
rate under the contract to the net balance due at the date of variation
and the net balance due included unpaid accrued credit charges, or

(ii) wherein the total amount payable pursuant to the

variation agreement included default charges which had accrued prior to
the date of variation but which were not disclosed as such in the
variation agreement,

and

(c) which variation agreements did not comply with the

requirements of ss (35 (1987) 1 NZLR 260) and 36 of the Credit Act,
1984."

Paragraph 7(2) of the further amended statement of claim seeks, inter
alia -

" A declaration that no represented debtor is required to pay to the
defendant any amount on account of credit charges as defined in the
Credit Act 1984 in relation to contracts as varied which fall within
the class specified in paragraph 6 of this Statement of Claim."

3. Counsel for the defendant, supporting the order of the Court of
Appeal, submits that this is not a case in which the plaintiffs can
commence and continue an action as representing the class of borrowers
identified by the criteria pleaded in par.6. The submission is based
on two related propositions: first, that the represented persons in a
representative action under Pt 8 r.13(1) of the Rules of the Supreme
Court of New South Wales must have "the same interest" in the
proceedings; second, that par.6 identifies the class in a way that
denies any real issue for determination. Part 8 r.13(1) reads as
follows:

" Where numerous persons have the same interest in any proceedings the
proceedings may be commenced, 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."

The defendant submits that the scope and purpose of the procedure
under Pt 8 r.13(1) is to overcome or to provide an exception to the
practice of the courts of equity that all persons having an interest in
the subject matter of the suit ought to be made parties (7 Templeton
v. Leviathan Proprietary Ltd. [1921] HCA 55; (1921) 30 CLR 34 at 43, 75-76) . And, as
each member of the putative class would have a distinct cause of
action arising out of distinct transactions, there is no common
interest in the proceedings. For that reason the class sought to be
represented could not be joined as plaintiffs, nor could their
respective causes of action be joined, in the same proceeding (8 Payne
v. Young [1980] HCA 54; (1980) 145 CLR 609 at 611, 614, 615, 617) .

4. For the reasons stated by Toohey and Gaudron JJ, I would reject
the proposition that the scope and purpose of Pt 8 r.13(1) is limited
in the manner submitted. Rule 13(1) requires "the same interest" in
the proceeding, not necessarily the same cause of action nor an
entitlement to have or to share in the same relief. I respectfully
agree with McHugh J. that the test for determining whether an action
is within the scope of Pt 8 r.13(1) is whether the plaintiff and the
members of the represented class have a community of interest in the
determination of some substantial issue of law or fact. Here, the
further amended statement of claim raised an issue in which there is a
community of interest, namely, whether s.70(1)(a) permits the
inclusion of unpaid credit charges under an original loan or credit
sale contract in the calculation of "the outstanding balance of the
amount financed" for the purposes of that provision.

5. However, it is precisely because of the flexible utility of the
representative action that judicial control of its conduct is
important, to ensure not only that the litigation as between the
plaintiff and defendant is efficiently disposed of but also that the
interests of those who are absent but represented are not prejudiced
by the conduct of the litigation on their behalf. 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
v. Newman Industries (9 (1981) Ch 229 at 255) , 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 (10 It was the attempt to allow any one shipper to conduct
litigation on behalf of another without his leave and yet so as to bind
him that was branded as a "fundamental error" by Fletcher Moulton L.J.
in Markt and Co., Limited v. Knight Steamship Company, Limited; Sale and Frazar v. Knight Steamship Company, Limited (1910) 2 KB 1021 at 1040) .
That power can be exercised at any time before the judgment is
perfected.

6. In the present case at the time when the plaintiffs delivered
their statement of claim, there appeared to be a live issue as to
whether, in the case of a variation agreement, "the amount financed"
as that term is used in s.70(1)(a) of the Act must exclude credit
charges under the original loan contract. In the course of argument,
counsel for the defendant conceded that if the plaintiffs brought
themselves within sub-pars (a), (b)(i) and (c) of par.6 of the further
amended statement of claim, they would be entitled to relief under
s.42. If it be conceded that the issue relating to the interpretation
of s.70(1)(a) is to be determined in favour of the plaintiffs and of
all members of the represented class coming within sub-par.(b)(i) of
par.6, there can be no doubt that the action is prima facie one
appropriate to be conducted as a representative action subject to the
court's supervision. The concession eliminates any risk that the issue
can be determined adversely to the members of the represented class
coming within sub-par.(b)(i). If it continues as a representative
action and that concession is not withdrawn, there will be a binding
declaration in favour of the plaintiffs and all members of the
represented class.

7. Counsel for the defendant submits, however, that the pleading
which identifies the persons represented is unsatisfactory and really
denies any issue of common interest for determination. He draws
attention to par.6 of the further amended statement of claim which
does not plead the facts which bring the contracts referred to in that
sub-paragraph within the definition of regulated loan or credit sale
contracts, nor the facts establishing non-compliance with the
requirements of ss.35 and 36. The facts are unique to each contract
but the criterion of the represented class is pleaded as a conclusion
that the contracts of all members of the class answer the description
therein alleged. Counsel further submits that a "variation agreement"
falling under sub-par.(b)(ii) of par.6 might not be supported by
consideration, though consideration is needed to constitute a "loan
contract" under s.3 of the Act. And, finally, it is said that the
credit charges in respect of which Mr and Mrs Carnie seek relief under
s.42 are pleaded as the credit charges under the variation agreement,
but par.7(2) may be seeking (it is said to be ambiguous) relief under
s.42 not only in respect of the credit charges under the variation
agreements but in respect of credit charges under the original loan
agreements. However, the plaintiffs accept, and intend, that the
declaration sought in par.7(2) relates only to credit charges under
the variation agreements.

8. The defendant's objections are without substance so far as they
challenge the availability of the representative procedure.
Sub-paragraphs (a) and (c) of par.6 simply ensure that the issue of
common interest and the declaration as to that issue are confined to
the issue arising under s.70(1)(a). And sub-par.(b)(ii) clearly
relates to a variation agreement enforceable subject to the Act. The
questions whether the arrangement with the defendant into which any
particular person has entered is a regulated loan or credit sale
contract and whether a particular variation agreement is supported by
consideration will be answered according to the circumstances of each
case. They do not arise and need not be addressed in the present
action except in respect of Mr and Mrs Carnie.

9. However, the defendant's objections are relevant to the second
aspect of Pt 8 r.13(1): should the action be permitted to continue as
a representative action? If it be conceded, or held, that s.42(1)(b)
applies to all variation agreements falling within par.6, s.85
entitles the defendant to apply to the Commercial Tribunal "for an
order increasing the liability of the debtor to the credit provider".
In other words, the application of s.42(1)(b) could prove to be a
pyrrhic victory for a debtor. The discretionary powers of the Tribunal
are to be exercised according to the individual circumstances of the
case. Is it appropriate, then, to permit the action to continue as a
representative action when, in any given case, it will be necessary to
determine whether the person seeking relief against the defendant has
entered into a loan or credit sale contract (11 Issues arising under
sub-par.(a) and arguably under sub-par.(b)(ii) of par.6) and whether
there has been a non-compliance with s.35 or s.36 (12 Issues arising
under sub-par.(c) of par.6) , and the ultimate benefit of the
litigation to that person will depend on the prospect of the
defendant's obtaining an order under s.85 increasing the liability of
the particular debtor? These are matters which it is appropriate for
the Supreme Court to consider in supervising the conduct of the
litigation.

10. As these matters were not material to the decision of the
majority of the Court of Appeal once their Honours decided that the
plaintiffs and the represented debtors did not have the "same interest
in (the) proceedings", I would agree with the order proposed by Mason
CJ, Deane and Dawson JJ. It will be for the Court of Appeal,
appreciating the nature of the interest common to the plaintiffs and
the represented class and evaluating the factors relevant to the
obtaining of substantive relief by each of the represented persons, to
determine (or to direct the determination of) the question whether the
action should continue as a representative action.

TOOHEY AND GAUDRON JJ. The order of the Court of Appeal of New South
Wales from which this appeal is brought reads:

"The Further Amended Statement of Claim filed on 10 August 1990, be
struck out insofar as it purports to plead a representative action".

The background
2. The appellants, Ainsley George Carnie and Dianne Helen Carnie,
are wheat farmers. In March 1986 they purchased an International 711
SP Header. They arranged finance through the respondent, Esanda
Finance Corporation Limited, and on 27 March 1986 the parties entered
into a loan contract and chattel mortgage ("the contract"). The
transaction was governed by the Credit Act 1984 (N.S.W.) ("the Act").
The contract was a "regulated contract" (13 as defined in s.5) for
the purposes of the Act (14 see s.30(2)) , thereby requiring
disclosures by the credit provider with penalties in case of default.
It was common ground that the contract complied with the requirements
of disclosure set out in s.36.

3. The contract showed that the amount financed was $22,000. The
predetermined credit charge of $12,641 was added to that amount,
resulting in a total amount financed of $34,641. Repayments were to
be made in three annual instalments of $11,547. Although the structure
of the contract appears to have taken into consideration the
particular circumstance of wheat farmers, namely that their income
generally comes in annual payments, the appellants were not able to
meet the first instalment due in February 1987. Accordingly the
parties agreed to vary the terms of the contract. That agreement,
dated 19 May 1987, was entitled "Variation Agreement". It is on a
printed form and several of the blanks have figures inserted. The
first item is headed "Outstanding balance of the amount financed at
time of variation" and shows $31,641. This was the amount originally
financed plus credit charges shown in the original contract, less
$3,000 which was apparently paid off the debt by the appellants at the
time of the variation. Additional credit charges by reason of the
variation are shown as $7,529.84. The instalments are set out as being
$2,000 due on 27 July, followed by three annual instalments of
$12,390.28 due in February 1988, 1989 and 1990.

4. The appellants' argument is that the figures in the Variation
Agreement are not in accordance with the Act. They contend that the
figure set out as the "Amount financed" is overstated by adding credit
charges to the original amount borrowed, with a deduction for a
payment made or about to be made, and interest calculated on that
balance. The result, they say, is that the respondent has been
charging interest on part of the original interest rather than on the
amount financed as defined. Whilst this manner of calculation is
permitted under the Act, the transaction must be documented in a
particular way and certain disclosures must be made. The appellants
contend that those disclosures have not been made and say that the
relevant penalties under the Act apply. In particular they say that by
reason of s.42 of the Act they are not liable to pay to the respondent
the credit charge provided for in the Variation Agreement.

5. There is evidence that the respondent had distributed guidelines
to its employees which involved other variation agreements being set
out in the same way. The appellants claim that they are personally
entitled to declarations and orders flowing from the contravention of
the Act. And, central to this appeal, they seek to make this claim on
behalf of all other parties who entered into offending variation
agreements of the same kind with the respondent.

The claim for a representative order
6. Paragraph 6 of the statement of claim as amended reads:

"The plaintiffs bring these proceedings on behalf of themselves and
all other persons ('the represented debtors') who have:-

(a) on or after 28 February 1985 entered into loan or credit sale
contracts with the Defendant which were regulated contracts within the
meaning of that term in the Credit Act 1984,

(b) each of which contracts has been varied by an agreement ('the
variation agreement') which did not discharge the original contract,
and

(i) wherein the total amount payable pursuant to the variation

agreement was calculated by applying the annual percentage rate under
the contract to the net balance due at the date of variation and the
net balance due included unpaid accrued credit charges, or

(ii) wherein the total amount payable pursuant to the variation

agreement included default charges which had accrued
prior to the date of variation but which were not disclosed as such in
the variation agreement,

and

(c) which variation agreements did not comply with the requirements of
ss 35 and 36 of the Credit Act, 1984."

The prayer for relief includes a declaratory order that no represented
debtor is required to pay to the respondent any amount on account of
credit charges as defined in the Act in relation to contracts
answering the description in par.6 of the statement of claim. The date
28 February 1985 mentioned in par.6 is the date when the relevant
sections of the Act commenced.

7. By notice of motion the respondent sought various orders against
the appellants. For the purposes of this appeal, it is necessary to
note only the following:

"1. AN ORDER (whether pursuant to the Supreme Court Rules 1970 Pt 8
r.13(1) or Pt 13 r.5 or otherwise) that the proceedings be stayed or
dismissed in so far as they purport to relate to a representative
action.

2. AN ORDER (whether pursuant to the Supreme Court Rules 1970 Pt 15
r.26 or otherwise) that the Amended Statement of Claim filed on 10
August 1990 be struck out in so far as it purports to plead a
representative action."

Thereafter the proceedings followed a tortuous course which it is
unnecessary to detail. They culminated in a decision of the Court of
Appeal (15 Esanda Finance Corp. v. Carnie (1992) 29 NSWLR 382)
(Gleeson CJ and Meagher JA, Kirby P dissenting) that the further
amended statement of claim "be struck out insofar as it purports to
plead a representative action".

8. The appellants base their claim for a representative order on
Supreme Court Rules 1970 (N.S.W.) Pt 8 r.13(1) which is in the
following terms:

" Where numerous persons have the same interest in any proceedings the
proceedings may be commenced, 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."

9. Gleeson CJ was of the opinion that a representative order was
inappropriate in the circumstances of the case. That opinion was
based on a number of concerns. First, that the proceedings were an
attempt to make the rule the foundation of a controversial modern
"class action" for which a rule as simple as r.13(1) is inadequate.
Another problem was that the history of the rule as explained by Lord
Macnaghten in Duke of Bedford v. Ellis (16 (1901) AC 1) shows
limitations on the concept of persons having the "same interest" in the
proceedings and that to say in this case that each borrower, with her
or his individual contract, has the same interest in the proceedings as
the appellants went "well beyond received notions of the scope and
purpose of the rule" (17 (1992) 29 NSWLR at 389) . His Honour also
expressed concern at the procedural difficulties that would arise if
the appellants were allowed to proceed with their representative
action: difficulties of identifying those who answered the description
in par.6 of the statement of claim, of knowing the attitude of such
persons to the contractual arrangements they had made with the
respondent and of ascertaining their attitude to the litigation.
Gleeson CJ concluded with this observation (18 ibid. at 390) :
" If class actions of the kind now available in the Federal Court are
to be permitted in New South Wales, (and there are large policy issues
involved in that decision), then this should only be done with the
backing of appropriate legislation or rules of court, adequate to the
complexity of the problem, and appropriate to the requirements of
justice."

10. Meagher JA agreed with the Chief Justice and branded the
course which the appellants wished to take as "seeking to intermeddle
in the commercial relationship between Esanda and its customers, who
may have no desire to be engaged in hostile litigation with their
financier" (19 ibid. at 404) . He saw no "common interest" between
the appellants and those whom they sought to represent.

11. Kirby P, on the other hand, thought it misleading to describe
the proceedings as a class action. His Honour examined the nature of
such an action at length in order to distinguish it from the
representative action which the appellants wished to bring. Failure
to make the distinction had led, in his view, to a failure to answer
the right question, namely, whether "the procedure adopted by the
(appellants) fell within, or outside, that permitted by the Rules; not
whether it was a 'class action'" (20 ibid. at 397). Furthermore, in his Honour's view, there had been "confusion between circumstances which
legitimately enliven the discretionary operation of the Rules, and
circumstances which take the procedure outside the scope of the Rules"
(21 ibid) . He concluded that, subject to certain amendments to the
statement of claim, the representative action should be allowed to
proceed. In our opinion, the general approach of Kirby P is correct.

The approach to a claim for a representative action
12. It is necessary to go back to Pt 8 r.13(1) itself and not merely
assume that it is a class action that the appellants wish to bring and
for which the Rules do not adequately provide. The starting point is
whether the procedure which the appellants wish to adopt is within the
Rules. If it is, a subsidiary question arises, whether the Supreme
Court should exercise its discretion to "otherwise order" and so
prevent the continuance of the proceedings in that form. With respect
to their Honours in the majority in the Court of Appeal, those two
necessary steps appear to have been taken as one.

13. In ascertaining whether the procedure which the appellants wish
to adopt is within the Rules it is helpful to consider the history and
interpretation of r.13(1), the ancestor of which is to be found in the
English Rules of the Supreme Court and which appears in various forms
in other common law countries. Rule 13(1) is almost identical in
language with O.15 r.12(1) of the English Rules of the Supreme Court,
from which it was clearly taken. The English rule was in turn derived
from an earlier rule which itself was derived from the practice of the
Court of Chancery (22 The Supreme Court Practice, (1993), vol.1,
15/12/1; and see Duke of Bedford v. Ellis (1901) AC 1) .

14. Historically the common law courts had no power to hear an
action by a representative plaintiff. However, in the Court of
Chancery representative actions were permitted in certain cases. With
the merger of common law and equity, the new rules of procedure
scheduled to the Supreme Court of Judicature Act 1873 (U.K.)
incorporated the chancery practice (23 Rule 10 of the Rules of
Procedure. Rule 10 was subsequently replaced in 1883 by O.16 r.9 and
then in 1962 by the current O.15 r.12(1)) . That practice was
described by Lord Macnaghten in Bedford v. Ellis (24 (1901) AC at 8)
as follows:
"The old rule in the Court of Chancery was very simple and perfectly
well understood. Under the old practice the Court required the
presence of all parties interested in the matter in suit, in order
that a final end might be made of the controversy. But when the
parties were so numerous that you never could 'come at justice,' to use
an expression in one of the older cases, if everybody interested was
made a party, the rule was not allowed to stand in the way. It was
originally a rule of convenience; for the sake of convenience it was
relaxed."

15. Initially the courts construed the rule narrowly. In Temperton
v. Russell (25 (1893) 1 QB 435) the requirement for those represented
to have the "same interest" was interpreted as applying only to
individuals who had a "beneficial proprietary right" in the matter (26
ibid. at 438) . However, in Bedford v. Ellis that narrow approach was
rejected by the House of Lords and, apart from one significant
exception (27 Markt and Co. Ltd. v. Knight Steamship Co. Ltd. (1910) 2
KB 1021) , in the cases that followed the general approach to
interpretation and application of the English rule became increasingly
liberal.

16. In Bedford v. Ellis a number of plaintiffs were permitted to sue
on behalf of themselves and all other growers of fruit, flowers,
vegetables, roots and herbs within the meaning of the Covent Garden
Market Act 1828 (U.K.) to enforce statutory preferential rights to
stands in the market. The plaintiffs sought a declaration as to the
true construction of the Act, an injunction to restrain the
infringement of their statutory rights and an account of the sums
which they had allegedly been overcharged. Lord Macnaghten, with whom
the majority concurred, identified three criteria which must be
satisfied before the representative rule can apply (28 (1901) AC at 8):
"Given a common interest and a common grievance, a representative suit
was in order if the relief sought was in its nature beneficial to all
whom the plaintiff proposed to represent."

The majority held there was a common interest and it did not matter
that the group was a fluctuating body which would be difficult to
catalogue. It was enough that there was a clear description of the
growers sought to be represented in the Act. The fact that the
plaintiffs were claiming separate and different rights under the Act
did not detract from the practicality of using the representative
procedure.

17. This broad and liberal approach suffered a setback with the
decision of the Court of Appeal in Markt and Co. Ltd. v. Knight
Steamship Co. Ltd. which had the effect for some time afterwards of
limiting the scope of the representative action to exclude those cases
where the relief claimed was damages and where separate and individual
contracts were involved. In that case the plaintiff shippers had
various goods aboard the defendant's vessel which was sunk by Russians
who suspected it of carrying contraband during the Russo-Japanese war.
The plaintiffs sued the defendant on behalf of themselves and the 44
other owners of cargo for "damages for breach of contract and duty in
and about the carriage of goods by sea" (29 (1910) 2 KB at 1025) .
The majority in the Court of Appeal held that the shippers did not have
the same interest because each contract was manifestly different.
Different defences such as estoppel and set off may have existed so
that no representative action could settle the rights of the individual
members of the class.

18. But the subsequent history of representative actions evidences a
greater readiness to sanction them. In John v. Rees (30 (1970) Ch
345) Megarry J. referred to the broad approach of Lord Macnaghten in
Bedford v. Ellis with approval, saying (31 ibid. at 369-370) :

" This seems to me to make it plain that the rule is to be treated as
being not a rigid matter of principle but a flexible tool of
convenience in the administration of justice."

His Honour said this approach was consistent with the language of the
rule which was wide and permissive in its scope while providing
adequate safeguards for the substance and that he "would therefore be
slow to apply the rule in any strict or rigorous sense" (32 ibid. at
370) .

19. In Prudential Assurance v. Newman Industries (33 (1981) Ch 229)
Vinelott J. traced the history of the rule and its application in the
United Kingdom. He distinguished Markt on its particular facts, saying
(34 ibid. at 254) :
"it is clear on authority and principle that a representative action
can be brought by a plaintiff, suing on behalf of himself and all
other members of a class, each member of which, including the
plaintiff, is alleged to have a separate cause of action in tort,
provided three conditions are satisfied".

The first condition was that no order could be made if the effect
might be to confer a right of action on a member of the class
represented who would not otherwise have been able to assert such a
right in separate proceedings, or to bar a defence which might
otherwise have been available to the defendant in a separate action.
The second was that the common interest requirement, where there are
separate causes of action in tort, is a requirement for a common
ingredient in the cause of action of each member of the class. In this
case the representative action resulted in a declaration that was
common in terms of relief to all the members of the class: whether a
circular sent to shareholders was misleading and contained statements
that were untrue. The third condition was that it must be for the
benefit of the class that the plaintiff be permitted to sue in a
representative capacity.

20. Likewise, in R.J. Flowers Ltd. v. Burns (35 (1987) 1 NZLR 260) , McGechan J. of the New Zealand High Court held that the fact that
claims arose under separate contracts was not an objection to the use
of a representative action. The defendant pleaded defences which, if
established, would remove any common interest. But at an early
interlocutory stage of the proceedings the Court was not prepared to
elevate the mere expression of contest by a defendant into an automatic
barrier to a representative action, saying (36 ibid. at 271) :

"The traditional concern to ensure that representative actions are not
to be allowed to work injustice must be kept in mind. Subject to
those restraints however the rule should be applied and developed to
meet modern requirements."

21. In Irish Shipping Ltd. v. Commercial Union (37 (1991) 2 QB 206)
the defendant sought to rely on Markt for the proposition that there
can be no common interest where there are separate contracts and the
claim of the plaintiff is damages. Staughton L.J. reviewed the English
authorities and came to the conclusion that the law had been reformed
by decisions since Markt (38 ibid. at 227) . The case involved
insurance contracts containing a leading underwriters clause which made
it possible to regard the 77 individual contracts as one contract.
However, while this was an important factor in finding a common
interest in this particular case, further authority has held that this
was not the decisive factor (39 Bank of America v. Taylor (1992) 1
Lloyd's Rep 484 at 494) .

22. In Naken v. General Motors of Canada Ltd. (40 (1983) 144 DLR (3d) 385 at 410) the Supreme Court of Canada found the O.8 r.13(1)
equivalent in Canada to be "totally inadequate for employment as the
base from which to launch an action of the complexity and uncertainty"
as the one before it. In the Court of Appeal Gleeson CJ referred to
that decision and appeared to treat the present case as one which fell
within the parameters of that conclusion. In Naken the applicants sued
General Motors on behalf of persons who purchased new 1971 and 1972
Firenza motor vehicles in Ontario and who had not at the date of the
writ sold the cars. Due to a defect the value of the cars was
allegedly diminished by $1,000. The claim was based on a breach of
implied and express warranty. The express warranty was contained in
newspaper advertisements. In order to prove their membership of the
class individuals would have had to prove they had responded to the
advertisement. Estey J. gave the decision of the Court that the case
was inappropriate for a representative action. A catalogue of problems
against such a course was listed, including the complexity of
determining the class which would entail the Master trying up to 4,932
claims; the lack of authority to award costs against unsuccessful
claimants for membership of the class; and the possibility of future
tort actions for personal injury arising out of reliance on the defect
being estopped.

23. However, Naken was carefully distinguished by the Alberta Court
of Appeal in Swift Canadian Co. v. Alberta Pork Producers' Marketing
Board (41. (1984) 9 DLR (4th) 71.).In that case the plaintiffs claimed a declaration of entitlement to an orderly market and free competition, together with a claim for damages suffered by the class by reason of the tortious conspiracy of the defendants to purchase hogs from the class for prices lower than those which would otherwise have prevailed. The
damages claimed were restricted to the difference on each transaction
made during the period between the price actually paid and the price
which would have been paid under the marketing system but for the
tortious conduct of the defendants. The Court held that a
representative action was appropriate because there was a common
interest in securing a declaration that the activities of the
defendants were unlawful and in recovering the losses sustained by
virtue of those activities. The damages of the class could be
determined by mathematical computation. The defendants would not be
prejudiced by inability to have discovery of all the members claiming
as plaintiffs.

24. In Shaw v. Real Estate Board of Greater Vancouver (42 (1973) 36
DLR (3d) 250 at 254) Bull JA observed:

"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."

In our view that observation is apposite to r.13(1), notwithstanding
the use of "representative action" rather than "class action".

The operation of r.13(1)
25. It is against this background that the operation of r.13(1)
falls to be considered though in the end it is the language of the
rule which must determine its meaning. The critical words are: "Where
numerous person have the same interest in any proceedings". In the
course of his judgment Kirby P referred to the requirements
identified by Lord Macnaghten in Bedford v. Ellis, namely, that all
persons to be represented have a common interest, that they have a
common grievance and that they stand to receive relief which, in its
nature, would be beneficial to all. This, of course, is not the
precise language of r.13(1) but Kirby P said (43 (1992) 29 NSWLR at
394) that the present appellants accepted the need to bring themselves
within these criteria and he was content to adopt the same approach.
In this Court the appellants placed greater emphasis on the actual
terms of r.13, arguing that a representative action should be available
whenever the two prescribed criteria are established, namely, numerous
persons having bona fide claims against another party and having the
same interest in the proceedings.

26. Although the judgments below and the argument in this Court
focused on r.13(1), reference should be made to other aspects of the
rule. Sub-rule (4) provides:

" A judgment entered or order made in proceedings pursuant to this
rule shall be binding on all the persons as representing whom the
plaintiffs sue or, as the case may be, the defendants are sued but
shall not be enforced against any person not a party to the proceedings
except with the leave of the Court."

Though any judgment or order will be binding on those for whom a
plaintiff sues, the represented parties are not liable for costs (44
Markt and Co. Ltd. v. Knight Steamship Co. Ltd. (1910) 2 KB at 1039) .
Sub-rule (6) allows any person against whom a judgment or order is
sought to be enforced to dispute liability "on the ground that by
reason of facts and matters particular to his case he is entitled to be
exempted from the liability".

Objections to a representative order: "same interest"
27. As Gleeson CJ observed (45 (1992) 29 NSWLR at 389) : "It is the meaning of the expression 'the same interest' ... that lies at the
heart of the problem".

28. The authorities are clear that the fact that claims arise under
separate contracts does not mean that the requirement for the same
interest is defeated (46 R.J. Flowers Ltd. v. Burns (1987) 1 NZLR 260;
Irish Shipping Ltd. v. Commercial Union (1991) 2 QB 206; Bank of
America v. Taylor (1992) 1 Lloyd's Rep 484; Palmco Holding Bhd. v.
Sakapp Commodities (M) Sdn. Bhd. (1988) 2 MLJ 624 and Voon Keng v.
Syarikat Muzwina Development Sdn. Bhd. (1990) 3 MLJ 61) . A refusal to
allow a representative action on this ground is open to the criticism
that it looks to the question of the Court's discretion to allow a
representative action to proceed rather than to the basic question of
whether the rule is applicable. That question, stated in terms of the
rule, is this: Do numerous persons have the same interest in the
action which the appellants have commenced? If they do not then that
is the end of the matter. If they do, then the action is properly
begun and, unless the Court otherwise orders, it may be continued.

29. Then it was argued that the same interest was lacking because
the relief might not be beneficial to all members of the class, that
some parties might not want to contend that their variation agreements
were null and void because they had the benefit of the extended time
for repayment provided by the variation agreements and that they might
be content with their arrangements. However, in the Court of Appeal
the appellants, without objection, abandoned the pursuit of a
declaration that the variation agreements were null and void. Kirby
P would have given leave to amend the statement of claim so that that
claim could be deleted, substituting declaratory relief that went no
further than determining the meaning of the Act so far as it affects
those concerned on matters in which they have a common interest. In
that event those debtors who do not wish to take advantage of a
favourable judgment would be under no obligation to do so. That is
the basis on which the matter was argued in this Court.

30. There are many persons who have entered into variation
agreements with the respondent. They have the "same interest" in
testing those agreements against the Act to see if the method of
calculating the amount owed was correct. If that method was not in
accordance with the Act, then those persons have a common interest in
obtaining the relief of being released from liability for the credit
charges. That is, they have the same interest in these proceedings in
the sense that there is a significant question common to all members
of the class and they stand to be equally affected by the declaratory
relief which the appellants seek.

31. Although each contract will be different in the details of the
amounts involved, this will not eliminate the convenience of finding a
right to a release which is common to all of them. As Lord Macnaghten
said (47 Bedford v. Ellis (1901) AC at 7) :

"In considering whether a representative action is maintainable, you
have to consider what is common to the class, not what differentiates
the cases of individual members."

Identification of class
32. The respondent contended that there were particular difficulties
in identifying the class which the appellants wished to represent.
But the onus on the appellants is not to identify every member of the
class; rather it is to identify the class with sufficient
particularity (48 ibid. at 11) . They have done this in par.6 of the
statement of claim. The class is not open ended; it is limited to
those persons who have credit sale or loan contracts with the
respondent which have been varied in circumstances where the variation
has been executed in such a way as to be inconsistent with the Act.
Furthermore the situation here, unlike cases such as Naken v. General
Motors Canada (49 144 DLR (3d) 384) , is one in which the respondent
knows or has the means of knowing better than anyone else the members
of the class.

Adequacy of r.13
33. As noted earlier, Gleeson CJ regarded the present case as an
attempt to make r.13(1) the foundation of a class action. Questions
of nomenclature aside, it is true that r.13 lacks the detail of some
other rules of court. But there is no reason to think that the Supreme
Court of New South Wales lacks the authority to give directions as to
such matters as service, notice and the conduct of proceedings which
would enable it to monitor and finally to determine the action with
justice to all concerned. The simplicity of the rule is also one of
its strengths, allowing it to be treated as a flexible rule of
convenience in the administration of justice and applied "to the
exigencies of modern life as occasion requires" (50 Taff Vale Railway
Co. v. Amalgamated Society of Railway Servants [1901] UKHL 1; (1901) AC 426 at 443) .
The Court retains the power to reshape proceedings at a later stage if
they become impossibly complex or the defendant is prejudiced.

Res judicata
34. In the course of argument a question arose as to the effect of a
judgment in these proceedings, if constituted as a representative
action. Strictly speaking, the question does not arise at the stage
where the issue is whether "numerous persons have the same interest in
any proceedings". Rather, it goes to the issue whether the Court
"otherwise orders" the continuance of the proceedings in that form.
Nevertheless, it is appropriate to say something about the effect of a
judgment on the represented persons; it has a bearing on the outcome
of this appeal.

35. If the action, constituted as a representative action, succeeds
those represented will have the benefit of declaratory relief as to
the meaning of the Act. Whether they choose to take advantage of such
a declaration will be a matter for them. But what if the action fails?
Counsel for the appellant conceded that each of the members of the
class would be "estopped". Later, in response to a question from the
Court, counsel agreed that "in theory" if the action failed borrowers
within the class would lose the right to take advantage of s.42 of the
Act. Section 42 provides that where there has been a failure to
comply with certain requirements of the Act, particularly relating to
disclosure, the debtor is not liable to pay to the credit provider the
credit charges under the contract. But it may be said that in the
light of such a decision there was no such right in any event.

36. The relevant principle is stated in the following way by Spencer
Bower and Turner (51 The Doctrine of Res Judicata, 2nd ed. (1969) at
par.231) :
" A judicial decision inter partes operates as an estoppel in favour
of, or (as the case may be) so as to bind, ... in the case of a
'representative' or 'test' action, all members of the class, whom a
party purports to represent therein, ... but not those who, though
alleged to be so represented, insist and establish that they are not".

37. In Naken v. General Motors of Canada Ltd. Estey J., in
delivering the judgment of the Court, was clearly concerned as to the
consequences of res judicata for those sought to be represented,
particularly as a fixed sum was claimed for the purchaser of each
motor vehicle though each might "still have rights flowing from the
formal contract of purchase and the warranties and covenants contained
therein" (52 (1983) 144 DLR (3d) at 407) . In Zhang De Yong v.
Minister for Immigration, Local Government and Ethnic Affairs (53
[1993] FCA 488; (1993) 118 ALR 165) French J. ordered that proceedings in the Federal
Court should not continue as a representative proceeding under Pt IVA
of the Federal Court of Australia Act 1976 (Cth) because of the
implications of res judicata for other applicants for refugee status.

38. In the argument before this Court nothing emerged to show that
members of the class in question would be prejudiced by the outcome of
this action other than in the obvious sense that they would be bound
by a judgment acceding to or rejecting the claim for relief. It would
not affect other rights they might have against the respondent, for
instance a claim that a member of the class had entered into a
contract as a result of misrepresentation or false or misleading
conduct. If it did appear that other rights would be affected, it
would be a matter for consideration in determining whether the Court
should otherwise order. But it is not a consideration in deciding
whether the action is properly constituted in terms of r.13(1). And,
as mentioned earlier, the members of the class are not liable to the
respondent in costs.

The appellants have brought themselves within r.13(1)
39. The appellants have brought themselves within r.13(1). There
are numerous other persons capable of being clearly defined who have
the same interest in these proceedings in that they will be equally
affected by the declaratory relief which the appellants seek.
Whether, in the end, they take advantage of that relief if granted is
another matter. But that consideration cannot disqualify the
appellants from invoking r.13(1). However, in reaching a conclusion as
to the applicability of r.13(1), it is appropriate to look a little
more closely at some aspects of the Act.

The implications of the Act for a loan contract
40. Part 3 of the Act is concerned with "regulated contracts", a
term which is defined (54 s.5) to mean "a regulated credit sale
contract, regulated loan contract or regulated continuing credit
contract". The appellants assert their Variation Agreement (and the
variation agreements of others) to be a "regulated loan contract", a
term which is defined (55 ibid) to mean "a loan contract to which
Part 3 applies". The term "loan contract" is defined (56 ibid) to
mean:
"a contract under which a person in the course of a business carried
on by him provides or agrees to provide ... credit to another person
... in one ... or more of the following ways".

Of the ways that follow, it is necessary to mention only par.(c), "by
varying the terms of a contract under which moneys owed to him by that
other person are payable".

41. The loan contract to which the appellants and the respondent are
parties is a loan contract for the purposes of Pt 3 (57 ibid) . Part
3 specifies a number of obligations in respect to loan contracts.
Where a loan contract does not comply with the requirements of the Act
and is caught by the penalty provision in s.42, the debtor is not
liable to pay to the credit provider the credit charge under the
contract, subject to a right in the credit provider to apply to the
Commercial Tribunal for an order increasing the liability of the debtor
(58 s.85) . "Credit charge" is defined (59 s.5) as "credit charge
within the meaning of section 11(1)". Broadly speaking, s.11(1)
identifies the credit charge as the amount by which the amount payable
under the contract by the debtor to the credit provider exceeds the
amount financed. To ascertain the "amount financed" it is necessary to
look to the formula in Sched. 4 to the Act.

42. Section 85 operates where, by reason of a contravention or a
failure to comply with the Act, a debtor is not liable to pay an
amount otherwise payable. In those circumstances the credit provider
may apply to the Tribunal for an order increasing the liability of the
debtor to the credit provider. The Tribunal, after consideration of
the relevant circumstances, may determine that the debtor is liable to
pay the amount financed and the whole or part of the credit charge.

43. It should be mentioned that s.70 permits a credit provider and
debtor under a loan contract to vary the terms of the contract if
certain conditions are met. An agreement to vary a contract in
accordance with the section is not a loan contract and hence is
outside the disclosure requirements of s.36 (60 s.70(5)) . The
appellants submitted that their Variation Agreement did not satisfy the
requirements of s.70 because of a failure to specify correctly
"Outstanding balance of the amount financed at time of variation" (61
see s.70(1)(a)) . But their case does not require them to take
themselves outside s.70; rather, that is a section which is available
to the respondent if it chooses to rely on it. And, as it happens,
during the course of the argument the appellants agreed that par.5A of
the statement of claim, which pleaded that the Variation Agreement did
not comply with s.70 and was therefore "null and void and of no
effect", should be struck out. With the removal of par.5A of the
statement of claim and sub-pars.(1A) and (1B) of the prayer for relief
in par.7, the appellants' case as pleaded is that the Variation
Agreement did not comply with Pt 3 of the Act and therefore they are
not liable to pay the credit charge; that the "represented debtors"
entered into variation agreements which likewise did not comply with Pt
3; that the appellants are entitled to a declaration that they are not
liable to pay to the respondent any amount on account of credit charges
and that no represented debtor is liable to pay any such amount.

Conclusion
44. On this footing, those whom the appellants seek to represent
have the same interest as the appellants. They have entered into loan
contracts with the respondent in circumstances where, if the
appellants can make good their claim, the variation of those contracts
was not in accordance with Pt 3 of the Act. Accordingly, they are not
obliged to pay any amount on account of credit charges. In terms of
r.13(1) all have the same interest in the proceedings. While it is not
known how many other borrowers might wish to take advantage of the
declaratory relief the appellants seek, all potentially stand to
benefit from a successful action.

45. In view of the conclusion that the decision of the Court of
Appeal was in error in holding that the appellants' action did not
fall within r.13, the appeal should be allowed. It might be said that
there is no point in allowing the appeal if, in all the circumstances,
the Supreme Court should "otherwise order" in respect of the
continuance of the proceedings. If the appellants had persisted with
their claims for declarations that the variation agreements were null
and void and of no effect, we would be disposed to remit the matter to
the Court of Appeal on the basis that the appellants' action fell
within r.13(1) and that it was for that Court to decide whether the
action should continue. However, since the appellants do not persist
with this particular aspect of their claim, there appears to be no
answer to what Kirby P said at the end of his judgment (62 (1992) 29
NSWLR at 403) :
"Once these are excised, what remains is a proper case for a
representative order. The class of person affected is clear, defined
and now closed. The primary relief sought is a declaration as to the
meaning of an Act of Parliament as it affects the members of that
claim in respect of which all of them will have a common interest and
a common legal grievance. So far as the orders are concerned, as so
amended, they seek relief which is wholly beneficial to all the
persons represented."

The trial judge has it within his or her power to "otherwise order"
if, as the action proceeds, circumstances make that course
appropriate.

46. We would therefore allow the appeal and set aside the orders of
the Court of Appeal striking out the further amended statement of
claim in so far as it purports to plead a representative action.

McHUGH J. The question in this appeal is whether "numerous persons
have the same interest" in the proceedings so that, "unless the court
otherwise orders", the plaintiffs may join them in a representative
action brought in accordance with r.13 of Pt 8 of the Supreme Court
Rules 1970 (N.S.W.). In my opinion, the persons described as
"represented debtors" in the statement of claim do have the same
interest as the plaintiffs, and r.13 authorises their joinder in a
representative action.

2. The facts and legislative provisions are set out in the judgment
of Toohey and Gaudron JJ. which also discusses the modern authorities.

3. In my opinion, a plaintiff and the represented persons have "the
same interest" in legal proceedings when they have a community of
interest in the determination of any substantial question of law or
fact that arises in the proceedings. Other factors may make it
undesirable that the proceedings should continue as a representative
action, but that is a matter for the exercise of discretion, not
jurisdiction.

4. In the present case, the represented debtors as well as the
plaintiffs have the same interest in determining whether the method
adopted by Esanda in the calculation of the variation agreement
repayments resulted in a breach of s.70 of the Credit Act 1984
(N.S.W.) ("the Act"). If that method did breach s.70, the standard
form variation agreement used in each case did not comply with the
requirements of s.36 of the Act. Consequently, s.42 of the Act which
imposes civil penalties for breach of s.36 would result in Esanda
forfeiting its credit charges under the loan contracts. The effect of
the breach for each of the represented debtors is no doubt different
from the effect for the plaintiffs. But all of them have a common
interest in determining whether Esanda's procedures in relation to the
variation of a credit or loan agreement comply with the Act.

5. The terms of r.13 are based on the principles that governed the
practice of the Court of Chancery in representative actions (63 cf.
Bedford v. Ellis (1901) AC 1 at 8) . In Bedford v. Ellis (64 ibid) ,
Lord Macnaghten, when considering the then English equivalent of r.13,
said that there was no reason for "restricting the rule, which was only
meant to apply the practice of the Court of Chancery to all divisions
of the High Court". His Lordship went on to say:

"Under the old practice the Court required the presence of all parties
interested in the matter in suit, in order that a final end might be
made of the controversy. But when the parties were so numerous that
you never could 'come at justice,' to use an expression in one of the
older cases, if everybody interested was made a party, the rule was
not allowed to stand in the way. It was originally a rule of
convenience: for the sake of convenience it was relaxed. Given a
common interest and a common grievance, a representative suit was in
order if the relief sought was in its nature beneficial to all whom the
plaintiff proposed to represent."

6. Rule 13(1) commences with a condition - "(w)here numerous
persons have the same interest in any proceedings". Being part of a
quasi-legislative instrument, the term "same interest" probably
requires a more exact application than was allowable in applying the
general principles of the Court of Chancery. Nevertheless, I see no
difficulty in holding that the "represented debtors" have the "same
interest" as that of the appellants.

7. As long ago as 1837 Frederic Calvert (65 A Treatise upon the Law
Respecting Parties to Suits in Equity, (1837) at 41) thought that the
"authorities" in the Court of Chancery justified the statement that
"when a large number of persons have a common interest in the entire
object of a suit in its nature beneficial to them all, one or more of
them may sue on behalf of all". It was sufficient that there was "some
community of interest between the active litigant and the members of
the represented group" (66 Yeazell, "From Group Litigation to Class
Action, Part II: Interest, Class and Representation", (1980) 27 UCLA
Law Review 1067 at 1084) . Furthermore, as Calvert pointed out (67
Calvert, op.cit. at 36) , it was not necessary that the claims of those
permitted to join in the suit should be "precisely of the same
degree".

8. Nothing in the application of the principles that guided the
practice of the Court of Chancery suggests that that Court would have
refused to apply its general practice to the kind of social problem
that lies at the back of the present action. In Taff Vale Railway v.
Amalgamated Society of Railway Servants (68 (1901) AC 426 at 443) ,
Lord Lindley, speaking of the rule of court that the House of Lords
considered in Bedford, said:
"The principle on which the rule is based forbids its
restriction to cases for which an exact precedent can be found in the
reports. The principle is as applicable to new cases as to old, and
ought to be applied to the exigencies of modern life as occasion
requires."

9. The procedure of the representative action was "invented by
Chancery in the seventeenth century to cope with disputes between
rural tenants and landlords, parishioners and parsons" (69 Yeazell,
op.cit. at 1067) . A reading of the cases in the eighteenth and
nineteenth centuries indicates that the Court of Chancery often allowed
the representative action to be used so that groups of individuals who
had suffered similar wrongs could redress the economic harm which they
had collectively suffered (70 Brown v. Howard (1701) 1 Eq Rep 163 (21
ER 960); City of London v. Perkins [1734] EngR 90; (1734) 3 Bro PC 602 (1 ER 1524);
Leigh v. Thomas [1751] EngR 63; (1751) 2 Ves Sen 312 (28 ER 201); Adair v. The New
River Co. [1805] EngR 272; (1805) 11 Ves Jun 429 (32 ER 1153); Hichens v. Congreve
(1828) 4 Russ 562 (38 ER 917)) . In many cases, the Court allowed
persons with the same or common interest to be joined in a
representative action only because the defendant insisted that the suit
was bad for want of parties and it was inconvenient to make all
interested persons parties to the action. In some cases the
represented parties had consented to and encouraged the plaintiff to
bring the action as a representative action. But in other cases the
Court allowed the plaintiff to represent persons with similar interests
whether or not they consented or even knew of the action (71 Yeazell,
"From Group Litigation to Class Action, Part I: The Industrialization
of Group Litigation", (1980) 27 UCLA Law Review 514 at 537) . This was
particularly true of actions arising from the activities of joint stock
companies and friendly societies. In that situation, as Yeazell points
out (72 ibid. at 522) , "the represented must rely on the congruence
of their interests with those of the representatives as the incentive
for effective representation; the self-interest of the representative
rather than the consent and supervision of the represented drives the
active party".

10. For much of this century, and notwithstanding the decision and
reasons in Bedford, the courts have given r.13 and its equivalents a
narrow meaning. But, as the judgment of Toohey and Gaudron JJ. shows,
the recent cases have been more liberal in allowing representative
actions to proceed. In the Age of Consumerism, it is proper that this
should be so. The cost of litigation often makes it economically
irrational for an individual to attempt to enforce legal rights
arising out of a consumer contract. Consumers should not be denied
the opportunity to have their legal rights determined when it can be
done efficiently and effectively on their behalf by one person with the
same community of interest as other consumers. Nor should the courts'
lists be cluttered by numerous actions when one action can effectively
determine the rights of many.

11. The entire object of the present action is to obtain a judicial
determination as to whether the method that Esanda used in dealing
with variations of loan or credit sale contracts complied with the Act.
All those persons who come within the class of debtors defined in
par.6 of the statement of claim have a community of interest in the
outcome of that determination. In Markt and Co. Ltd. v. Knight Steamship Co. Ltd. (73 (1910) 2 KB 1021) , the English Court of Appeal held that
persons did not have the same interest within the meaning of the rule
when they sued for damages arising out of separate and individual
contracts. But it is now well established that the existence of
separate contracts does not prevent the represented persons having the
same interest as the plaintiff in the action (74 Irish Shipping Ltd.
v. Commercial Union (1991) 2 QB 206; Bank of America v. Taylor (1992) 1
Lloyd's Rep 484) .

12. In Prudential Assurance Co. Ltd. v. Newman Industries Ltd. (75
(1981) Ch 229 at 255) , however, Vinelott J. said that in "a
representative action in which it is claimed that every member of the
class has a separate cause of action in tort, this condition requires
... that there must be a common ingredient in the cause of action of
each member of the class". I see no reason to confine the rule to
cases where there is a common element in the causes of action of the
plaintiff and the represented persons. If the plaintiff and the
represented persons have a community of interest in the determination
of some substantial issue of law or fact in the action, they have the
same interest within the meaning of the rule. In such a case, other
factors may require that the court, in the exercise of its discretion,
should "otherwise" order.

Discretion
13. Since the amendment to the pleadings, the question to be decided
is one of law and applies to the represented debtors' agreements as
well as to the plaintiffs' agreement. The object of the suit is to
obtain a determination as to whether Esanda's procedures when varying
agreements comply with the Act. Every one of the represented debtors
has the same interest in that question whether or not that person
wishes to obtain any benefit from an interpretation that is favourable
to him or her. The identity of interest between the plaintiffs and
those they seek to represent gives the plaintiffs the incentive to
represent the other debtors effectively. Gleeson CJ thought that,
if class actions are to become part of our litigation procedure,
various matters (76 See Esanda Finance Corp. Limited v. Carnie (1992)
29 NSWLR 382 at 388 "such important matters as whether or not consent
is required from persons who are to be group members in representative
proceedings, the position of persons under disability, the right of a
group member to opt out of a representative proceeding, alterations to
the description of the group, settlement and discontinuance of
proceedings, and the giving of various notices to group members".)
needed to be governed by rules. However, the present action is not a
class action, and, having regard to the way that the statement of claim
has now been amended, I do not think that those matters provide any
basis for exercising a discretion to stop the present action proceeding
as a representative action.

Order
14. I agree with the order proposed by Toohey and Gaudron JJ.