Allphones Retail Pty Ltd ACN 008 168 090 v Weimann

THE ISSUES UNDER CONSIDERATION 6 The issue which Allphones seeks to ventilate on appeal is the correctness of the Court's decision in Weimann [2009] FCA 673 that amendment to the application and pleadings should be permitted to (in effect), convert the proceeding to a representative proceeding pursuant to Pt IVA FCA. 7 Section 33C FCA was the basis for the motion considered by his Honour. That provision provides as follows: 33C Commencement of proceeding (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. (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. 8 The group members for the purpose of the application have been divided into two subgroups of franchisees of Allphones. The first subgroup is Group A franchisees, being those who have exercised their right to renew their respective franchise agreements. The second is Group B franchisees, being those whose franchise agreements do not fall due for renewal until dates which range between 2010 and 2012. 9 Allphones took no objection to the inclusion of Group A franchisees as members of the group but opposed inclusion of the Group B franchisees on several bases. 10 Broadly speaking, those grounds of opposition were first, that it was not established that their respective 'claims', if they had any 'claims' for the purpose of s 33C FCA had sufficient commonality. Secondly, there was not at present a justiciable controversy between Group B franchisees and Allphones. The latter contention was and is based on the submission that as the right of franchise renewal of Group B franchisees falls on a date in the future, it is uncertain whether or not, when the time comes for renewal, the Group B franchisees will have a right to renew their franchise agreements, will exercise the right to renew them, and if they do so, then in what form may seek to renew them (cf Horn v Australian Electoral Commission [2006] FCA 1778). 11 Allphones rely on the absence of any present dispute between Allphones and any of the Group B franchisees. Allphones argues that their claim for the purpose of s 33C FCA would extend beyond the definition of a 'matter' for the purpose of s 75-77 of the Constitution. 12 It is unnecessary to examine at present the detailed submissions made in support of the application and the equally detailed consideration by his Honour but I am satisfied that the arguments do properly and reasonably raise matters of novel and general importance. 13 The respondent to the motion presses for the application for leave to appeal to be refused at this stage as it is hopeless. At least a superficial examination of it is necessary to determine whether the application is fit to go to the Full Court. A hopeless application should not be referred to the Full Court (let alone allowed). For reasons which follow I do not consider this application falls into that category.

THE TEST FOR LEAVE 14 Under the two-fold test in Decor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 the applicant must satisfy the cumulative requirements that: (a) in all the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court; and (b) that substantial injustice will result if leave is refused supposing the decision to be wrong. 15 Allphones submits that the criterion that the decision be attended with sufficient doubt is intended simply to screen out hopeless appeals. It is argued that this criterion does not require the Court to consider in the course of an application for leave the merits of the proposed appeal but rather whether the matter raised is fit for appeal. Fitness for appeal is consistent with 'warranting it being reconsidered by the Full Court'. 16 Although the respondent's written submissions contend that there is an absence of 'sufficient doubt', the main thrust of the oral argument was that there is an absence of substantial injustice. As to the written submissions, the respondent argues the conclusion reached by his Honour that the 'issue comes back to the question whether or not the representative proceeding on behalf of all franchisees, both Group A and Group B members, raises real issues with real consequences depending on the outcome' (at [89]). 17 The Group B members, it is said, raise existing claims of unconscionable conduct on the part of Allphones in threatening all franchisees that if they do not agree to execute Allphones' new franchise agreements, Allphones would require them to do so when they sought to renew their franchise agreements. Further, it is argued that the Group B members' claim is not hypothetical because they could have no confidence that Allphones would act in accordance with the Court's decision in the proceeding if they do not remain members of the represented class. It is argued that Allphones apparently seeks to re-litigate or at least not act consistently with all of the matters determined against it in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (2008) 167 FCR 314 in the current proceedings. See also Australian Competition & Consumer Commission v Allphones Retail Pty Ltd (No 2) (2009) 253 ALR 324, particularly at [121]-[122], [134] and [143]. 18 It is submitted that against that background, his Honour was correct to hold that each Group B member has a real interest in the clarification of their current contractual position and the determination of the allegation of unconscionable conduct. 19 Allphones says there is a distinction between these two claims. Even if it could be argued that the allegation of unconscionable conduct against the Group B members raised a current justiciable controversy, Allphones argues that the contractual claim does not do so. That argument is raised for the reasons indicated above (in [10]) and on the basis of the dictum of Holland J in Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428 at 434. That case was considered by his Honour in [105] of Weimann v Allphones [2009] FCA 673. Allphones argues that what steps a member of the Group B franchisees will take such as renewing or otherwise is something in each case that, to use the words of Holland J 'he has not yet taken is not bound to take and may not take'. This appears to be where the debate lies. 20 While I have eliminated the possibility of the appeal being on its face, hopeless, I do not in light of the intended disposition of this matter propose to say more on its prospects or merits.

THE INJUSTICE CONSIDERATION 21 The respondent to this application submitted that no examination of the merits of the prospective appeal was necessary because it was manifestly clear that the application should be dismissed due to the absence of any demonstrable injustice if leave were refused. 22 Allphones contends that while the decision is interlocutory in nature (and if it were not, leave would not be necessary) it is substantive in character and not a mere matter of practice and procedure. Allphones argues that the decision has serious implications for the parties, in particular, Allphones. In short, if it is allowed to stand, Allphones will be required to respond to an action brought on behalf of 35 group members rather than ten (although those numbers appear to change a little from time to time). It would be impracticable in my view, to descend to detailed evidence as to the additional cost which will be occasioned by the nature of the amendment. It would be self-evident that there would be additional complexity and associated costs occasioned for the proceeding. Although there is no specific evidence on the point, it was argued that the additional complexity and additional costs involved in a hearing which is listed for trial in December, may in turn give rise to prejudice at trial. It is argued that substantial injustice will result to Allphones if there is no appeal against the decision and the decision is wrong as it will then be obliged to defend more complex, protracted and expensive proceedings and arguably without any subsequent right to re-agitate the question of the nature of the 'claim' but in circumstances where any judgment against it will have uncertain consequences for its potential future dealings with franchisees. 23 Allphones also contends and in my view, correctly, that having regard to efficiency and economy it would be inappropriate for the Court at first instance to require further argument if it is satisfied on the papers that the appeal cannot be said to be obviously unmeritorious and that the proposed appeal raises grounds of substance worthy of consideration by the Full Court. 24 Finally, Allphones contends that the application for leave to appeal and the appeal proper should be the subject of expedition. It undertakes to do all that is necessary on its part to achieve expedition. In that context, it points to the listing of the matter for trial in December and suggests that an appeal, if leave were granted, could at least theoretically be heard this month. 25 The respondent to the motion focussed predominately on the absence of irreparable harm citing Auspine Ltd v H S Lawrence & Son Pty Ltd & Anor [1998] FCA 953in which it was said that whether a litigant will suffer substantial injustice as a consequence of an interlocutory decision is a question of whether 'irreparable harm will be done to [the applicant] if the orders were allowed to stand or that [the applicant] will be prejudiced in an irremediable way in the manner in which [it] is able to conduct the trial'. 26 It is the second limb of that passage, however, on which Allphones relies. But the respondent contends that Allphones has failed to identify any relevant prejudice. In particular, it is argued that, as far as discovery is concerned, an obligation to give more extensive discovery than would otherwise be required cannot constitute a substantial injustice (Auspine per Goldberg J, (von Doussa and Mansfield JJ agreeing) at 5). Secondly, interrogatories or the putting of a standard set of questions formulated by Allphones to class members prior to trial would be an acceptable way of dealing with the position of individual class members and thirdly, that whether the parties are likely to incur any additional cost as a consequence of the position remaining unaltered requires a comparison of the likely additional costs of the trial proceeding with Group B remaining as a represented class with the costs of the proposed interlocutory appeal. There is no detailed evidence adduced in that regard by Allphones. 27 In Auspine the application was for leave to appeal from orders in which there was a dismissal of the respondents' motion that certain paragraphs of the applicant's amended statement of claim and formulation of damages be struck out. The Court observed that as the primary judge was exercising a discretion in considering whether the relevant paragraphs of the amended statement of claim should be struck out, the appellate Court was not to form its own view of the matter but rather to determine whether the discretion had miscarried. 28 The current application seems to me to be a case more in line with TS Production LLC v Drew Pictures Pty Ltd [2008] FCA 1329 where Heerey J referred to the Full Court the application for leave to appeal from an interlocutory judgment of Sundberg J allowing a stay of proceedings. His Honour observed (at [7]): Order 52 r 2AA requires some ground to be shown why an application for leave to appeal should be determined by the Full Court. In my opinion such ground has been shown in the present case. This case cannot be characterised as a minor interlocutory squabble over discovery or the like. His Honour's orders result in important consequences for the parties, even though, as Mr Rebikoff for the respondents pointed out, they do not determine substantive rights. 29 It appears to me equally that this case cannot be characterised as a minor interlocutory squabble over discovery or the like and that the orders may result in important consequences for the parties even though they do not of themselves determine substantive rights. 30 In the present situation, the contention is that there is a potential risk of prejudice at trial because of the joinder of a substantial number of new applicants and the need to prepare for trial which will necessarily be of a different character from that which was scheduled prior to the amendment being permitted. The complaint as to the lack of specificity about either the additional cost or prejudice is understandable but equally, it would be very difficult to identify either of those factors in advance. It seems to me that the complaint as to substantial injustice has more force in this instance than in Auspine. 31 The amendment may raise a potentially significant cost burden in addition to prejudice. In TS Production LLC, Heerey J placed weight on the opportunity for the applicant to contest and possibly win the Australian proceeding without having to defend the more extensive United States proceeding. It may also have been that an issue estoppel was created. Similarly, in this case, it might be argued that the opportunity to contest the more confined proceedings rather than the representative proceedings, together with the rulings which might flow from the more confined proceedings would be of real benefit and being disentitled that opportunity may 'arguably amount[s] to real injustice' (Heerey J at [9]).

CONCLUSION 32 The factors on which I have touched are all driven simply to answering the question of whether the application for leave should be heard by a Full Court. I have not sought to answer in detail the question as to whether the judgment is attended by doubt sufficient or otherwise for the reason that it is not really practicable to separate out the sufficient doubt issue from the substantive merits. As in TS Production LLC [2008] FCA 1329 and as in Optiver [2008] FCA 47, the more efficient and appropriate course, is to refer the application for leave to appeal to be heard by a Full Court of this Court. It is not for me to order that the appeal be heard by the Full Court but as in TS Production LLC,I will make an order that subject to any contrary direction of the Full Court, that course be pursued. 33 I am conscious that the matter is listed for trial in December. Whether or not it is possible for a Full Court to consider the leave issue and/or the appeal in time for a trial to proceed in December is doubtful but I will attempt to accommodate at least the possibility by making an order for expedition as requested. 34 Accordingly, the following orders are the orders I make: 1. The application for leave to appeal be heard by a Full Court of this Court. 2. Subject to any contrary direction of the Full Court, the application for leave to appeal be heard concurrently with or, alternatively, immediately before the appeal. 3. The parties do comply forthwith with Practice Note 1 of 2008. 4. Pursuant to O 52 r 37 of the Federal Court Rules, the appeal will be expedited. 5. Costs are reserved. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate: Dated: 7 August 2009 Counsel for the Applicant: RJ Whitington QC with BC Roberts