Asirifi-Otchere v Swann Insurance

Federal Court of Australia|2020-09-25|Before: Gleeson J

Subject to further order, the matters to be determined at the initial trial are: (a) the whole claim of the applicant; (b) the whole claim of any sample group members; and (c) the questions of fact or law common to the claims of the applicant and the group members, and any other questions of substantial commonality, as set out at annexure A to these orders.
Lindi Glick, Amanda Melvin and Leanne Rea each be appointed as a sample group member for the purposes of order 1 above.
The respondents pay the applicant's costs of the interlocutory application filed 13 July 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A Unless otherwise indicated, defined terms have the meaning given to them in the Further Amended Statement of Claim (FASOC). Swann's Business Model (1) During the Relevant Period, did the Swann business model have one or more of the characteristics described in the FASOC at [14C] and Amended Defence (AD) at [14C] (Swann Business Model)? The Add On Insurance Products (AOIPs) (2) Is the Claims Loss Ratio of an insurance product, such as an AOIP, accepted within the insurance industry as a means of assessing the value of the product to the insured? (FASOC [14B]; AD [14B]) (3) Is a low Claims Loss Ratio an indication that an insurance product is of low or no material value to a customer? (FASOC [14B]; AD [14B]) (4) During the Relevant Period was the Claims Loss Ratio of each of the AOIPs: (a) low; and/or (b) significantly lower, or lower, than the Claims Loss Ratio for other consumer orientated general insurance products? (FASOC [14A]; AD [14A]) (5) Did any one or more of the AOIPs have no or no material financial value, and, if so, which one(s)? (FASOC [31(b)]; AD [31(b)]) (6) Were the Authorised Representatives (ARs) financially incentivised, encouraged, compelled, forced and/or strongly urged by Swann to sell as many insurance products as possible, including AOIPs, to the applicant and the group members? (FASOC [31(c)]; AD [31(r)], [31(s)]) (7) Was the cover provided by the MBI AOIP referred to in paragraph 11(e) of the FASOC unnecessary, or in the alternative potentially unnecessary, given the provisions of the Trade Practices Act 1974 (Cth) (TPA), or after 1 January 2011, the Australian Consumer Law (ACL)? (FASOC [31(f)]; AD [31(t)-(v)]) (8) Were there only limited features of the MBI AIOP referred to in paragraph 11(e) of the FASOC, which provided benefits beyond the existing statutory obligations of the manufacturer or seller of the Motor Vehicle pursuant to the provisions of the TPA, or after 1 January 2011, the ACL, and, if so, what were those limited features? (FASOC [31(g)]; AD [31(t)-(v)]) (9) If a purchaser of AOIPs financed their purchase by way of an interest-charging loan, would the purchaser have paid a greater amount for those AOIPs than they would have paid if they had purchased the same AOIPs for the same price without such borrowing? (FASOC [31(h)(i)]; AD [31(w)-(x)]) (10) May purchasing a single premium policy result in the purchaser (if and to the extent that they financed their premium) incurring greater interest charges in respect of the AOIPs than they would incur should they pay the same premium by cash in instalments? (FASOC [31(h)(iii)]; AD [31(w)-(x)]) Swann Sales System (11) During the Relevant Period, did Swann design, implement and operate a system for the sale of AOIPs comprising one or more of the following elements (Swann Sale System): (a) appointing Motor Vehicle Dealers as ARs under Swann's AFSL to sell AOIPs to their customers using a contractual framework with features referred to in FASOC [16]-[19] (FASOC [15], [16]-[19]; AD [16]-[19]); (b) a commissions and incentive scheme for ARs (and/or their employees or independent contractors) with features referred to in FASOC [19]-[23] (FASOC [15], [19]-[23]; AD [19]-[23]); (c) training and instruction provided to ARs (and/or their employees or independent contractors) with features referred to in FASOC [24]-[27] (FASOC [15], [24]-[27]; AD [24]-[27]); (d) provision of an electronic sales system, known as the "Activ8" sales system, to ARs (and/or their employees or independent contractors) with the features referred to in FASOC [28]-[28A] (FASOC [15], [28]-[28A]; AD [28]-[28A]); and/or (e) a system of targets for sales of AOIPs by ARs (and/or their employees or independent contractors), and for monitoring and enforcing those targets, with the features referred to in FASOC [28C] (FASOC [15], [28C]; AD [28C])? (12) Was the Swann Sales System designed to: (a) satisfy the particular needs of Swann's business created by the Swann Business Model; and (b) increase Swann's market share, revenue and profit, or maintain its market share, revenue and profit, given the nature of the Swann Business Model? (FASOC [15A]; AD [15A]) (13) At all relevant times during the Relevant Period was the income generated by the commissions and incentive scheme referred to in question (11)(b) the most important source, or alternatively a significant source, of profits for ARs? (FASOC [23AA]; AD [23AA]) (14) At all relevant times during the Relevant Period, was the intention or purpose of any of the: (a) commissions and incentive scheme referred to in question (11)(b); (b) the training and instruction referred to in question (11)(c); (c) electronic sales system referred to in question (11)(d); or (d) sales target setting, monitoring and enforcement process referred to in question (11)(e), to: (e) incentivise or cause ARs to sell Swann's products and thereby protect and increase Swann's market share and profits, which were under threat from its competitors during the Relevant Period; ([FASOC [23A(a)], [27A(a)], [28B(a)], [28D(a)]; AD [23A(a)], [27A(a)], [28B(a)], [28D(a)]) (f) incentivise or cause ARs to sell as many AOIPs as possible and, therefore, incentivise ARs to sell products to consumers irrespective of whether they were suitable for a customer's needs; and/or ([FASOC [23A(b)], [27A(b)], [28B(b)], [28D(b)]; AD [23A(b)], [27A(b)], [28B(b)], [28D(b)]) (g) encourage, cause or require ARs to adopt a sales process predominantly focused on generating sales for Swann by emphasising the benefits of products, distracting from the true value of the products to the applicant and group members (if any) and not disclosing the facts in FASOC [31] (FASOC [38A]; AD [38A])? (15) At all relevant times during the Relevant Period, did the commission arrangements pleaded at FASOC [19] to [23] of the, by reason of the matters pleaded in paragraphs 19 to 23AA of the FASOC, make it likely that ARs would not disclose to potential purchasers of AOIPs material information about the AOIPs that was relevant to their decision whether to proceed with the acquisition of AOIPs, especially information that would indicate to potential purchasers that the AOIPs they were considering were not suitable for them or would not represent value for money of them? (FASOC [23A(c)]; AD [23A(c)]) (16) At all material times during the Relevant Period: (a) did the induction training for ARs, or training subsequently delivered to ARs, developed and provided by Swann, include training on how to sell the AOIPs by instructing ARs to present customers with "packages" or "menus" of AOIPs, each involving the sale of at least two AOIPs together; and (b) if so, was this with the intention or effect that this would cause the customer to conclude that they had to buy at least one of the packages or menus offered, including the AOIPs contained in the package or menu? (FASOC [26(b)]; AD [26(b)]) (17) At all material times during the Relevant Period did the induction training for ARs, or training subsequently delivered to ARs, developed and provided by Swann, include training on how to sell the AOIPs, by instructing ARs to create in the customer's mind a perceived need to buy one or more of those AOIPs, by creating in the customer's mind a hypothetical future need or problem which could then be solved by the benefits of one or both of the AOIPs? (FASOC [26(d)]; AD [26(d)]) (18) At all material times during the Relevant Period, did the training referred to in one or more of paragraphs 26(b) to 26(n) of the FASOC make it likely that ARs would not disclose to potential purchasers of AOIPs material information about the AOIPs that was relevant to their decision whether to proceed with the acquisition of AOIPs, especially information that would indicate to potential purchasers that the AOIPs they were considering were not suitable for them or would not represent value for money for them? (FASOC [27A(c)]; AD [27A]) (19) At all material times during the Relevant Period, did the processes referred to in paragraph 28C of the FASOC make it likely that ARs would not disclose to potential purchasers of AOIPs material information about the AOIPs that was relevant to their decision whether to proceed with the acquisition of AOIPs especially information that would indicate to potential purchasers that the AOIPs they were considering were not suitable for them or would not represent value for money for them? (FASOC [28D(c)]; AD [28D]) (20) At all material times during the Relevant Period, did the Activ8 Sales System referred to in paragraphs 28 to 28A of the FASOC make it likely that ARs would not disclose to potential purchasers of AOIPs material information about the AOIPs that was relevant to their decision whether to proceed with the acquisition of AOIPs, especially information that would indicate to potential purchasers that the AOIPs they were considering were not suitable for them or would not represent value for money for them? (FASOC [28B(c)]; AD [28B]) (21) Did the Swann Sales System involve the sale of AOIPs to customers in one or more of the circumstances listed in FASOC [38]? (22) To what extent (if at all) was Swann aware of any of the matters pleaded in FASOC [39] during the Relevant Period? (FASOC [39]) (23) To what extent ought Swann have reasonably known that it was making a statement and/or disseminating information (including through its ARs acting as its agents) to persons buying AOIPs that was materially misleading because it was aware of the matters that were not disclosed to those purchasers, as pleaded in FASOC [31]? (FASOC [42D]; AD [42D]) (24) When Swann sold its AOIPs of the kinds purchased by the applicant, did it care about whether it made statements or disseminated information (including through its ARs acting as its agents) to persons buying AOIPs which were true or false regarding those AOIPs? (FASOC [42E]; AD [42E]) Sale of the AOIPs to the applicant and group members (25) During the Relevant Period, did Motor Vehicle Dealers acting as ARs act as representatives and agents of Swann in connection with persons being offered, applying for or obtaining finance? (FASOC [30]; AD [30]) (26) Did any one or more of the matters in FASOC [31] constitute material information about the AIOPs that would have been relevant, or highly relevant, to the decision of a customer of whether to proceed with the purchase of AOIPs? (FASOC [32], [35], [35A], [42B], [42C]) (27) Were the ARs instructed by Swann to disclose to prospective purchasers of the AOIPs the matters pleaded at FASOC [31]? If so, which matters? (28) To the extent that Swann did not disclose or cause the ARs to disclose to the prospective purchasers of the AOIPs the matters pleaded at FASOC [31], was the failure to disclosure such matters misleading and deceptive, leaving aside any relevant facts which are peculiar to the applicant or a particular group member? (29) To the extent that Swann did not disclose or cause the ARs to disclose to the prospective purchasers of the AOIPs the matters pleaded at FASOC [31], was Swann's failure to disclose or cause the ARs to disclose such matters to prospective purchasers of the AOIPs unreasonable, leaving aside any relevant facts which are peculiar to the applicant or a particular group member? (FASOC [40(c)]; AD [40]) (30) If the ARs sold the AOIPs in accordance with the training pleaded at FASOC [24]-[26] and or using the Activ8 Sales System pleaded at FASOC [28]-[28B], would the ARs have disclosed to prospective purchasers of the AOIPs the matters pleaded at FASOC [31]? If so, which matters? (31) Did Swann engage in unfair tactics in respect of the sale of AOIPs to customers by means of any one or more elements of the Swann Sale System? (FASOC [40(b)]; AD [40]) (32) In the implementation of the Swann Sale System, did the ARs fail to conduct themselves in an efficient, honest, fair and transparent manner in respect of the sale of AOIPs to customers, leaving aside any relevant facts which are peculiar to the applicant or a particular group member? (FASOC [40(f)]; AD [40]) Mistake/unjust enrichment (33) Would group members who purchased one or more of the AOIPs have been mistaken, if at the time of acquiring the AOIPs they held one or more of the beliefs pleaded at FASOC [43]? (34) Did Swann give good consideration to the persons from whom it received the payment of premiums for the purchase of AOIPs and, if so, is Swann therefore not obliged to repay the premium payments received by it? (AD [49]) (35) To the extent that the applicant and group members have made claims on the AOIPs, does the making of such claims constitute unequivocal words or conduct by which they have elected to take the benefit of those policies and, if so, are they not entitled to the repayment of the premiums paid in respect of those policies? (AD [50]) (36) If the mistaken beliefs by the applicants and the group members were reasonably discoverable at the time of, or in the alternative immediately after, or in the alternative within a period of 21 days, 28 days, or 30 days from the date of purchase of the relevant AOIPs, does the delay in bringing the proceedings make it inequitable in the circumstances to require Swann to repay the premiums paid in respect of the AOIPs in whole or in part? (AD [51]) (37) Were any one of more of the matters in FASOC [31] reasonably ascertainable by customers of the ARs at the time of purchase, or thereafter, and, if so, which matters? Contraventions (38) Leaving aside any relevant facts which are peculiar to the applicant or a particular group member, on the facts found in answer to the preceding questions: (a) Did Swann engage in misleading or deceptive conduct or conduct that was likely to mislead or deceive in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act)? (FASOC [34(a)], [34A(a)]) (b) Did Swann engage in conduct that was liable to mislead the public as to the nature, characteristics and the suitability for their purpose of financial services in contravention of s 12DF(1) of the ASIC Act? (FASOC [34(b)], [34A(b)]) (c) Did Swann engage in conduct in this jurisdiction in relation to a financial product or a financial service that was misleading or deceptive or was likely to mislead or deceive in contravention of s 1041H(1) of the Corporations Act? (FASOC [34(c)], [34A(c)]) (d) Did Swann engage in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act? (FASOC [40]) (e) Did Swann engage in unconscionable conduct in contravention of s 991A(1) of the Corporations Act? (FASOC [41]) (f) Did Swann contravene s 1041E of the Corporations Act? (FASOC [42F]) (g) Did Swann contravene s 12DB of the ASIC Act? (FASOC [42H], [42L]) Loss and Damage (39) What are the principles governing the measurement of loss or damage (if any) suffered by the applicant and group members by reason of any contraventions as alleged in the FASOC which have been established? (FASOC [36], [42]) (40) Are the applicant and the group members entitled to interest to the extent that they were eligible to participate in the remediation program Swann has undertaken in respect of the AOIPs, or to the extent they were entitled to cancel their policy, but did not do so? (AD [52]) Limitations Acts (41) From what date are the causes of action pleaded in the statement of claim statute-barred? (42) From what date do the amendments to the statement of claim (other than the amendment to the group member definition) made by the amended statement of claim take effect, and, accordingly, from what date are the causes of action pleaded in the amended statement of claim statute-barred? (43) From what date do the amendments to the amended statement of claim made by the FASOC take effect, and, accordingly, from what date are the causes of action pleaded in the FASOC statute-barred? Proportionate liability (44) Are the Motor Vehicle Dealers concurrent wrongdoers (within the meaning of that term in the Corporations Act and ASIC Act) in respect of the conduct the subject of the FASOC? (AD [59]) (45) If the answer to question (44) is yes, are the respondents still liable for any conduct by the Motor Vehicle Dealers found to have caused the applicant and group members to suffer losses? (Reply [12]) (46) If the answer to question (44) is yes, is the respondents' liability in relation to each of the applicant's and/or group Member's claims limited by: (a) s 1041N of the Corporations Act in respect of claims under s 1041H of the Corporations Act; and/or (b) s 12GR of the ASIC Act, in respect of claims under s 12DA of the ASIC Act? (AD [59], Reply [12]) Reductions in damages (47) Can, and if so, should, any loss or damage suffered by the applicant and/or group members be reduced by the amount of any input tax credit claimed by the group member in respect of the GST paid on the premium for the AOIPs? (AD [60]) (48) Can, and if so, should any loss or damage suffered by the applicant and/or group members be reduced to the extent they claimed tax deductions or otherwise reduced their taxable income in respect of any amounts they paid referable to the AOIPs? (AD [61]) (49) Can, and if so, should any loss or damage suffered by the applicant and/or group members be reduced to the extent that the applicants and group members received: (a) payments pursuant to the remediation program Swann has undertaken in respect of the AOIPs; (b) amounts or the benefit of any claims paid by Swann; and/or (c) benefits referable to the existence of a potential right to indemnity during the currency of the AOIPs.

GLEESON J: 1 By interlocutory application filed 13 July 2020, the applicant seeks an order, subject to further order, identifying the matters to be determined at the initial trial (common questions), and an order for the appointment of a "sample" group member. 2 The parties agreed on many common questions. Ultimately, there were two issues of principle dividing them, namely: (1) Whether, for the purpose of determining issues common to the claims of only some of the group members (not being issues relevant to the applicant's claim), it is first necessary to establish a relevant sub-group and appoint a person to be the sub-group representative party on behalf of the sub-group members under s 33Q(2) of the Federal Court of Australia Act 1976 (Cth) (FCA); and (2) Whether certain of the proposed common questions are inappropriate because they can only be resolved by considering the individual circumstances of each group member.

BACKGROUND FACTS 3 The proceeding concern six add on insurance products (AOIPs) identified in the further amended statement of claim (FASOC). The AOIPs were sold to consumers during the period 1 January 2008 to 1 August 2017 (relevant period) at or around the time of the purchase of a motor vehicle or motor cycle. 4 According to the respondents, the proceeding spans up to 673,000 individual transactions entered into by several hundred thousand policyholders. 5 The applicant purchased two of the six AOIPs, referred to as Gapcover Insurance and Motor Vehicle Mechanical Breakdown Insurance (also called "WarrantyASSIST" or Motor Vehical Extended Warranty Insurance) (MBI). 6 The other four AOIPs are referred to in the FASOC as Loan Protection Insurance, Walkaway Insurance, Protection Plus Insurance and Tyre and Rim Insurance. 7 The applicant has proposed draft common questions concerning all six of the AOIPs. 8 The respondents argue that, if the applicant wishes to have common questions determined at the initial trial that are not relevant to the applicant's claim, group members who purchased the other four AOIPs should be joined to the proceeding as sub-group representative parties. 9 The applicant argues that the appointment of sub-group representative parties is unnecessary and will be unhelpful. The applicant notes that the case is based on allegations that the first respondent (Swann): (1) adopted a business model that applied to the AOIPs; and (2) designed, implemented and operated a system for the sale of the AOIPs, referred to as the Swann Sales System. 10 The applicant contends that the proposed common questions concerning all of the AOIPs are relevant to his individual claim that the respondents engaged in unconscionable conduct (FASOC Section E, [37]-[42F]). The allegation of unconscionable conduct is pleaded by reference to matters that include features of the Swann Sales System (FASOC [38]), the purpose and effect of the Swann Sales System (FASOC [38A]) and Swann's awareness concerning all of the AOIPs (FASOC [39]). 11 However, even if the proposed common questions were not relevant to his individual claim, the applicant still contends that those questions may be addressed at the initial trial without the appointment of sub-group representative parties, consistent with well-established practice since Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2001] VSC 372 (Johnson Tiles). See, for example, Matthews v SPI Electricity Pty Ltd and Others (Ruling No 5) [2012] VSC 66 at [4]; (2012) 35 VR 615 at 617, Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 5) [2015] NSWSC 1771 at [19]-[22] and Dillon v RBS Group (Australia) Pty Limited [2017] FCA 896 at [66]-[68] and [75]; (2017) FCR 150 at 164-167.

Statutory provisions 12 Sections 33Q, 33R and 33S of the FCA provides: 33Q Determination of issues where not all issues are common (1) If it appears to the Court that determination of the issue or issues common to all group members will not finally determine the claims of all group members, the Court may give directions in relation to the determination of the remaining issues. (2) In the case of issues common to the claims of some only of the group members, the directions given by the Court may include directions establishing a sub-group consisting of those group members and appointing a person to be the sub-group representative party on behalf of the sub-group members. (3) Where the Court appoints a person other than the representative party to be a sub-group representative party, that person, and not the representative party, is liable for costs associated with the determination of the issue or issues common to the sub-group members. 33R Individual issues (1) In giving directions under section 33Q, the Court may permit an individual group member to appear in the proceeding for the purpose of determining an issue that relates only to the claims of that member. (2) In such a case, the individual group member, and not the representative party, is liable for costs associated with the determination of the issue. 33S Directions relating to commencement of further proceedings Where an issue cannot properly or conveniently be dealt with under section 33Q or 33R, the Court may: (a) if the issue concerns only the claim of a particular member - give directions relating to the commencement and conduct of a separate proceeding by that member; or (b) if the issue is common to the claims of all members of a sub‑group - give directions relating to the commencement and conduct of a representative proceeding in relation to the claims of those members. 13 Section 33ZC sets out the following rights of appeal: (1) The following appeals under Division 2 of Part III from a judgment of the Court in a representative proceeding may themselves be brought as representative proceedings: (a) an appeal by the representative party on behalf of group members and in respect of the judgment to the extent that it relates to issues common to the claims of group members; (b) an appeal by a sub-group representative party on behalf of sub-group members in respect of the judgment to the extent that it relates to issues common to the claims of sub-group members. (2) The parties to an appeal referred to in paragraph (1)(a) are the representative party, as the representative of the group members, and the respondent. (3) The parties to an appeal referred to in paragraph (1)(b) are the sub-group representative party, as the representative of the sub-group members, and the respondent. (4) On an appeal by the respondent in a representative proceeding, other than an appeal referred to in subsection (5), the parties to the appeal are: (a) in the case of an appeal in respect of the judgment generally - the respondent and the representative party as the representative of the group members; and (b) in the case of an appeal in respect of the judgment to the extent that it relates to issues common to the claims of sub-group members - the respondent and the sub-group representative party as the representative of the sub-group members. (5) The parties to an appeal in respect of the determination of an issue that relates only to a claim of an individual group member are that group member and the respondent. (6) If the representative party or the sub-group representative party does not bring an appeal within the time provided for instituting appeals, another member of the group or sub-group may, within a further 21 days, bring an appeal as representing the group members or sub-group members, as the case may be. 14 Section 33ZF provides: (1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding. (2) Subsection (1) does not limit the operation of section 22.

Appointment of Ms Rea as sample group member 15 The applicant seeks to appoint Leanne Rea as a sample group member. Ms Rea purchased the Loan Protection Insurance and Gapcover Insurance. Her case is that she purchased AOIPs by reason of a mistaken belief that she was obliged to do so. 16 Mr Kirk SC did not dispute that it is convenient to determine Ms Rea's claim at the initial trial. 17 In Johnson Tiles, the representative plaintiffs were permitted to call group members to give evidence relevant to their claims, even though their evidence was not relevant to the claims of the plaintiffs. These witnesses were described as sample group members. 18 At [37], Gillard J concluded that s 33Q(1) gives a wide power to the Court to decide questions which will not finally determine the claims of all group members. His Honour gave the following reasons concerning the Court's power at [48]-[51]: [48] In my opinion, there is nothing in Part 4A of the Act which requires that there has to be a plaintiff for each group. Certain prerequisites have to be satisfied, but there is nothing which precludes a plaintiff whose claim is the same as those constituting one group, also bringing the proceeding on behalf of other members of another group, so long as the three threshold features are present. In my view, the provisions referred to above make that clear. [49] In my opinion, it follows that it is open to a plaintiff to call a witness who may give evidence of factual matters, which do not assist that plaintiff's claim but do raise for consideration and determination, a question of fact or law which is common to some or all members of a group. [50] In my view, the Court should endeavour to decide as many common questions of fact and law in a group proceeding, to facilitate the outcome of the litigation. If some questions are only relevant to some group members and not all, or to one group and not the other, so be it. As long as it may have some substantial practical effect in the determination of the litigation, one of the objects of group litigation is achieved. [51] It follows that, in my opinion, the plaintiffs are entitled to call, as witnesses, any member of a group in order to adduce evidence which is relevant to any issue raised, and a plaintiff may represent a group even though he is not a member of that group. Of course, he must have a claim against the defendant. 19 The respondents accepted that the practice of appointing sample group members is well established, but note that all relevant authority is prior to the decision of the High Court in BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 374 ALR 627 (BMW). Mr Kirk SC also acknowledged the Court's power to appoint sample group members to hear test cases. However, Mr Kirk SC contended, following BMW, it is not permissible to appoint a sample group member to facilitate the determination of issues common to the claims of a sub-set of group members. 20 Although Mr Kirk SC submitted that there was an issue as to whether or not there should be any sample group members, as opposed to sub-group representative parties under s 33Q(2), ultimately, he did not develop an argument to the effect that it was inappropriate to appoint Ms Rea as a sample group member in the circumstances of this case. 21 Accordingly, I will appoint Ms Rea as a sample group member pursuant to s 33Q(1).

Are sub-groups required to determine all proposed common questions? 22 Mr Kirk SC contended that the Court should not order the determination of common questions concerning all six of the AOIPs, when the applicant has purchased only two of them. If the applicant wished to have those issues determined at the initial trial, according to Mr Kirk SC, the applicant must obtain an order pursuant to s 33Q(2) for the establishment of a sub-group consisting of group members who have purchased the other four AOIPs and appoint a person to be the sub-group representative party on behalf of the sub-group members. 23 Mr Kirk SC did not address the applicant's contention that the disputed common questions are relevant to the applicant's individual claim. Based on the FASOC, I accept that contention and will order the determination of the proposed questions concerning all of the AOIPs on that basis. 24 If I am wrong in that conclusion, I would also reject Mr Kirk SC's argument that the appointment of sub-group representative parties is necessary in order to determine issues common to the claims of group members apart from the applicant for the following reasons: (1) Section 33Q(1) is expressed to confer on the Court a broad power to make directions "in relation to the determination of the remaining issues" on the proviso stated in s 33Q(1). Section 33Q(2) expands the power in s 33Q(1) to permit directions of a particular kind, that in turn invoke the costs liability under s 33Q(3) and the right of appeal in s 33ZC(1)(b) in respect of a "sub-group representative party". (2) As Murphy and Colvin JJ observed in Dyczynski v Gibson [2020] FCAFC 120 at [209]; (2020) 381 ALR 1 at 50 (Dyczynski), the scheme of Part IVA is that the applicant has the conduct of proceedings on behalf of class members and has fiduciary obligations to them, citing Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28 at [40]; (2015) 256 CLR 507 at 524. Contrary to Mr Kirk SC's submission, the applicant has "skin in the game" in those circumstances and it is not necessary to appoint a sub-group representative to ensure that the initial trial is conducted by a party with an interest in sub-group issues. (3) Where the class action is funded, there is apparent reason why the respondents require the protection of the entitlement to costs conferred by s 33Q(3). (4) There is no risk that group members will be deprived of appeal rights. Section 33ZC(6) confers a right of appeal on any group member and it is far from obvious that the applicant's right of appeal under s 33ZC(1)(a) is restricted to issues affecting his individual claim, as Mr Kirk SC contended. Section 33ZC(1)(a) speaks of "issues common to the claims of group members", in contrast with s 33Q(1), which refers to "the issue or issues common to all group members" and s 33Q(2) refers to "issues common to the claims of some only of the group members". (5) The High Court's decision in BMW is directed to the proper construction of s 33ZF and not of s 33Q(1). Similarly, the decision of the New South Wales Court of Appeal in Haselhurst v Toyota Motor Corporation Australia Ltd t/as Toyota Australia [2020] NSWCA 66; (2020) 379 ALR 556 is directed to the New South Wales analogue of s 33ZF. Accordingly, neither of those decisions is relevant to the current question. (6) The reasons of the High Court in Timbercorp Finance Pty Ltd (in liq) v Collins [2016] FCA 44; (2016) 259 CLR 212 (Timbercorp), especially at [49] (French CJ, Kiefel, Keane and Nettle JJ) and [141] (Gordon J), do not require a conclusion that the applicant may not represent group members at the initial trial with respect to issues common only to some group members. In Kamasee v Commonwealth [2017] VSC 272, McDonald J rejected an argument that Johnson Tiles was wrong and inconsistent with the decision in Timbercorp. At [40], his Honour concluded that nothing in the High Court's reasoning, either expressly or by necessary implication, supported a conclusion that, absent an order under s 33Q appointing a group member as a sub-group representative, a plaintiff in a group proceeding cannot call a witness to give evidence of factual matters which do not support the plaintiff's personal claim but which do raise for consideration and determination a question of fact or law which is common to some or all members of a group. At [49], McDonald J observed: [49] Further, it does not follow from the High Court's conclusion that a plaintiff in a group proceeding does not represent group members with respect to their individual claims [see Timbercorp at [52]-[53]], that the Court is precluded from hearing evidence and making findings in relation to those claims unless an order has been made under s 33Q. The High Court judgment does not address this question. Where the Court hears evidence and makes findings with respect to claims relating to the individual claims of group members, the plaintiff does not represent the individual group members. The absence of a representative capacity as between plaintiff and individual group members does not prevent the Court from hearing evidence and making findings in relation to the claims of individual group members. The reasons of the Full Court in Dyczynski also do not require such a conclusion. 25 As to Dyczynski , Mr Kirk SC contended that the logic of the decision has relevant implications. At [96], Murphy and Colvin JJ said: [96] … the applicant and class members are privies in interest of class members only in respect of the common questions of fact or law, not their individual claims. The applicant could not represent the interests of affected class members in relation to Preliminary Questions which concerned the merits of their individual claim to fall within one or more of the categories of Art 33. Her representative capacity was limited to the claims giving rise to the common claims the subject of the proceeding: Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 (Timbercorp) at [39], [49], [53]-[54] (French CJ, Kiefel, Keane and Nettle JJ), [122] and [141]-[142] (Gordon J). 26 As appears from this passage, the "Preliminary Questions" were not questions common to the claims of some or all group members. Rather, the questions concerned whether each individual claim satisfied jurisdictional requirements. 27 At [249]-[251], their Honours also said: [249] We respectfully agree with the remarks of Lee J at [391] regarding the appropriateness of s 33ZB orders upon settlement approval and the intersection of that provision with ss 33V and 33ZF. Class members in a class action are only "bound by the determination of the claims giving rise to the common questions", and the applicant represents class members "only with respect to the claim the subject of that proceeding, but not with respect to their individual claims": Timbercorp at [53]-[54]. That includes common claims that are not pleaded because, as Gaudron, Gummow and Hayne JJ observed in Mobil Oil [Australia Pty Ltd v Victoria [2002] HCA 27; (2002) 211 CLR 1] at [34], what is decided in a class action is "...the claims that are made, or could be made, against the defendant by all those in the "class" or "group" that is identified in the proceeding." [250] The position is different in relation to class members' individual or idiosyncratic claims. Since Timbercorp it has been settled that a judgment in representative proceedings can only bind class members in relation to the common issues of fact or law. The Victorian Court of Appeal has however drawn a distinction between the resolution of claims by judgment and through settlement. In Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 (Santamaria, Ferguson and McLeish JJA) their Honours concluded (at [56]-[58]) that, in a class action settlement, s 33ZF supplies the privity which is otherwise absent in respect of the individual claims of class members, such that a settlement may be binding on class members in respect of both common claims the subject of the proceeding and any individual claims. On that basis the Court concluded that a class action can be settled "on whatever terms the parties have agreed and the Court has approved". [251] It is unnecessary to decide but we would respectfully take a different view. The authority of a representative applicant to represent class members' interests is conferred by Part IVA, and the applicant and class members are only privies in interest with respect to and to the extent of those common claims which are the subject of the proceeding. The applicant represents the class members only to the extent of the common claims: Timbercorp at [39], [49], [53]-[54], [122] and [141]-[142]. In the absence of express statutory words we would not conclude that Parliament intended that, absent authorisation by class members, the applicant has authority to settle the individual or idiosyncratic claims of class members. It is relevant to note that in many class actions: (a) the applicant will know little or nothing about any claims class members have based in their particular individual or idiosyncratic circumstances; (b) class members will not be on notice that their individual or idiosyncratic claims might be settled without their instructions as part of the case based in common issues they were told about in the opt out notice; and (c) the Court asked to approve the settlement can be told little or nothing about class members' individual or idiosyncratic claims because they are unknown to the applicant and his or her lawyers. Absent authorisation by class members it is difficult to see how an applicant may presume to deal with the individual claims of class members howsoever they arise, as distinct from the common claims which are the subject of the class action. 28 Mr Kirk SC submitted that the logic of this reasoning is that an applicant cannot make a concession about an issue which is common to some group members, but not relevant to the applicant's individual claim. However, that is not what the applicant is seeking to do. Dyczynski was fundamentally concerned with the problem of a lawyer acting without his client's authority. It was not concerned with the effective case management of the proceeding and the proper exercise of the power in s 33Q(1).

Appointment of additional sample group members 29 Alternatively, the respondents submitted that additional sample group members should be appointed so that the initial trial would determine the claims of group members who, between them, purchased the six AOIPs. 30 As noted above, the applicant and Ms Rea purchased, between them, three of the six AOIPs. 31 The respondents noted that the applicant proposes to call Lindi Glick and Amanda Melvin as witnesses. Between them, Ms Glick and Ms Melvin purchased the remaining three AOIPs (as well as other AOIPs). The respondents submitted that, as they will be giving evidence at the initial trial, they should have the entirety of their claims determined so that they may not be required to give evidence twice. I did not understand this course to be opposed by the applicant and I accept that it is preferable that Ms Glick and Ms Melvin should only give evidence once. 32 Accordingly, I will appoint them as sample group members.

PROPOSED QUESTIONS CONCERNING MISLEADING OR UNREASONABLE CONDUCT, OR CONTRAVENTIONS 33 The applicant proposed the following questions that are objected to by the respondents: To the extent that Swann did not disclose or cause the Authorised Representatives to disclose to the prospective purchasers of the [AOIPs] the matters pleaded at FASOC [31], was the failure to disclose such matters misleading or deceptive? To the extent that Swann did not disclose or cause the Authorised Representatives to disclose to the prospective purchases of the [AOIPs] the matters pleaded at FASOC [31], was Swann's failure to disclose or cause the Authorised Representatives to disclose such matters to prospective purchasers of the [AOIPs] unreasonable? 34 The respondent argued that questions of this kind may only be answered by reference to all the circumstances of the posited non-disclosure, and accordingly can only be determined by reference to the individual circumstances of each alleged instance of non-disclosure: Butcher v Lachlan Elder Realty [2004] HCA 60; (2004) 218 CLR 592 at [37]. 35 At [109]-[111], McHugh J said: [109] The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. [110] The Court of Appeal erred when it found that, for the purposes of s 52, conduct is not misleading or deceptive unless it contains or conveys, in all the circumstances of the case, a misrepresentation. Misleading or deceptive conduct [111] Conduct is misleading or deceptive if it induces or is capable of inducing error. A corporation does not avoid liability for breach of s 52 because a person who has been the subject of misleading or deceptive conduct could have discovered the misleading or deceptive conduct by proper inquiries. Conduct that objectively leads one into error is misleading. (Footnotes excluded) 36 The case pleaded in the FASOC is premised upon the existence of a system for the sale of AOIPs. Accepting that there may be particular circumstances in the interactions by which the applicant and each group member purchased the AOIPs, on the applicant's case, the relevant course of conduct will have substantial similarities. In my view, it is likely useful to address questions of the kind posed subject to a qualification of the kind adopted by Gillard J in Johnson Tiles in formulating a common question as to the existence of a duty of care, that is, "leaving aside any fact relevant to the issues which are peculiar to the said plaintiff or a particular group member". 37 This reasoning also applies to the following proposed questions: • In the implementation of the Swann Sale System, did the authorised representatives fail to conduct themselves in an efficient, honest, fair and transparent manner in respect of the sale of AOIPs to customers? • In light of the preceding questions: (a) Did Swann engage in misleading or deceptive conduct or conduct that was likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act? (b) Did Swann engage in conduct that was liable to mislead the public as to the nature, characteristics and the suitability for their purpose of financial services in contravention of s 12DF(1) of the ASIC Act? (c) Did Swann engage in conduct in this jurisdiction in relation to a financial product or a financial service that was misleading or deceptive or was likely to mislead or deceive in contravention of s 1041H(1) of the Corporations Act? (d) Did Swann engage in unconscionable conduct in contravention of s 12CB(1) of the ASIC Act? (e) Did Swann engage in unconscionable conduct in contravention of s 991A(1) of the Corporations Act? (f) Did Swann contravene s 1041E of the Corporations Act? (g) Did Swann contravene s 12DB of the ASIC Act?

Question 2 38 Question 2 was not disputed once the Court granted leave to permit an amendment to the FASOC to the following effect: Is the Claims Loss Ratio of an insurance product, such as an Add On Insurance Product, accepted within the insurance industry as a means of assessing the value of the product to the insured, where a low Claims Loss Ratio indicates that the product is of low or no material value to the customer? (FASOC [14B]; AD [14B])

Question 27 39 The respondents contended that the relative bargaining positions of Swann and its customers cannot be determined in the abstract. I agree. This is a question that will be determined in the cases of the applicant and the sample group members.

CONCLUSION 40 The applicant has been substantially successful in obtaining the relief sought. Costs should follow the event. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gleeson.

Trade Practices Act 1974(Cth)

Federal Court of Australia Act 1976(Cth)ss 33Q, 33R, 33S, 33ZC, 33ZF

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